There’s some upbeat news for retirement savers this week.
A rule protecting financial advisory clients was signed into law, and encouraging findings from a major retirement confidence survey show that the lion's share of retirees are, well, happy.
First, the headliner: The Biden administration announced new rules that will require more financial professionals to adhere to a higher standard when providing financial advice about retirement money.
“America’s workers and their families rely on investment professionals for guidance as they save for retirement,” US Department of Labor Acting Secretary Julie Su said in a statement. “This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest.”
Starting Sept. 23, investment professionals will be required to act as fiduciaries — meaning they must put your needs as an investor before their own interests and deliver unbiased advice to you. Sounds obvious, and it’s hard to fathom that this had to be nailed down, but here you have it.
Starting Sept. 23, investment professionals will be required to act as fiduciaries — meaning they must put your needs as an investor before their own interests. (Getty Creative) ·skynesher via Getty Images
Now, when clients like you pay for financial advice from a professional about your retirement accounts, such as a 401(k) plan or individual retirement account (IRA), they are required to give the advice that’s best for you and not forthem.
Under the new rule’s wording, investment advice fiduciaries must give advice that is “prudent and loyal, avoid misleading statements about conflicts of interest, fees, and investments, follow policies and procedures designed to ensure the advice given is in an investor's best interest, charge no more than is reasonable for their services, and give investors basic information about any conflicts of interest.”
“And more than half of workers who aren’t currently getting help from an adviser say they will in the future,” Craig Copeland, director of Wealth Benefits Research at EBRI, told Yahoo Finance.
“Retirees were most likely to consider financial advisers and professionals as a trusted source of information for retirement planning,” he added.
Retirees say their lifestyle in retirement is better than they expected. (Getty Creative) ·COROIMAGE via Getty Images
Confident in a comfortable retirement
The survey’s big takeaway this year: Two-thirds of Americans feel confident that they have enough money for a comfortable retirement, up a hair from last year. Boomers and millennials, however, reported higher confidence in having enough money to live comfortably throughout retirement than Gen Xers.
While that’s certainly encouraging, workers’ and retirees’ confidence has not yet completely recovered from the ground it lost in 2023, when it was down markedly from 77% confidence levels in 2022.
“Overall, though, there is a fairly strong optimism among workers and retirees with their prospects for retirement,” Copeland said.
However, over a third of retirees say their travel, entertainment, or leisure expenses are higher than they expected. Over half of retirees say their overall retirement expenses are higher than they initially expected.
But they have shaken that off. Most say they can spend money how they want, within reason. Even sweeter, their lifestyle in retirement is better than they expected.
“Retirees feel pretty comfortable with what they're doing,” Copeland said. “Even though they aren’t as optimistic as they were two years ago, in general, retirees are feeling pretty good about their situation.”
Not only are retirees managing their current expenses, but also, a majority say they’re still saving for the future. And nearly two-thirds are confident they will have enough money to leave an inheritance.
Running the numbers
Sticking with the glass-half-full theme, Americans are taking steps to make a financial plan for their golden years.
More than 4 in 10 workers offered a workplace retirement savings plan report having increased their contributions in the past year.
According to researchers, half of Americans have calculated how much money they will need in retirement. And the fallout from their calculation — a sizable portion of workers and retirees started to save more.
“Our research found that if someone had done the calculation, they were more likely to start saving, and they had a better understanding of what numbers sound reasonable,” Copeland said. “If they did that planning and they came up with a number, it kept them in reality and made them more confident because they knew what they needed to reach for.”
They have a lot of ground to make up. According to the survey, a third of workers who tried to calculate how much they would need in retirement estimated $1.5 million or more.
However, many of those workers currently have less than $50,000 in savings and investments, and 14% have less than $1,000.
A deeper planning dive
Six in 10 workers have thought about how the age at which they claim Social Security can affect how much they will receive.
That said, what workers plan vs. what retirees actually do are quite different. A little over a quarter of workers plan to claim Social Security benefits at a median age of 65, which is the same age they expect to retire.
That’s not what has happened in the past, though. Most retirees — 7 in 10 — report retiring earlier than age 65, with a median retirement age of 62. And they started collecting Social Security at around age 64.
Most workers want to step out of the workforce “gradually, over time.” But a whopping two-thirds of retirees had a “full-time stop” experience.
Moreover, the vast majority of retirees reported that the reason they retired earlier than planned was out of their control.
Only 3 in 10 retirees say they actually have worked for pay since retiring. (Getty Creative) ·Stephen Zeigler via Getty Images
Working for pay in retirement
The vast majority of workers said that they would work for pay in retirement, while only 3 in 10 retirees say they have actually worked for pay since retiring.
For those who have continued to work, they mostly do so to stay active and involved.
That didn’t surprise Copeland. “Historically, going back to 2005, the majority of retirees said they wanted to work for pay after they retired." But what happens is that working gets derailed by health or difficulty finding a job at older ages, he said.
“We still have these issues where older workers face discrimination in the workplace," Copeland said.
