A variety of factors and special situations make each individual’s retirement preparations unique. And because of that, there is no one-size-fits-all retirement plan to maximize enjoyment during your golden years. However, when it comes to retirement planning fears, people have more in common than they might think. The AICPA’s recent Personal Financial Planning Trends Survey explored what factors are impacting clients’ retirement planning peace of mind. When compared to benchmark responses from 2016, we’re able to see how some things have changed while others have held steady.
Here are clients’ top concerns:
Running out of money remains the top retirement planning concern for clients, cited by 30 percent of CPA financial planners. Though still the top concern, this reflects an improvement from the AICPA’s 2016 survey, which found 41 percent of CPA financial planners listing it as their client’s top concern. The decline is likely due to the economy’s steady improvement over the last few years, as the stock market has continued to climb despite periods of volatility.
Maintaining their lifestyle
Worry about maintaining current lifestyle and spending level in retirement was a close second planning concern, cited by 28 percent of CPA financial planners. This is consistent with the 2016 survey where it was cited by 29 percent of respondents and once again came in second. When preparing for this pivotal life transition, it helps to have a tax-efficient plan for how to best consume your retirement savings. Without thoughtful planning, taxes can take a hefty bite out of cash flow, and that’s especially painful when living on a fixed income in retirement.
Rising cost of healthcare
Stress from rising health care costs (18 percent), though a distant third once again, is up 7 percentage points from 2016. With medical costs forecast to continue growing throughout 2019, this is not surprising. As individuals are living longer lives, having a plan in place for a serious illness or incapacity is critical for maintaining peace of mind. Individuals should first consider all the options available for dealing with prolonged medical and personal care in a way that accomplishes their goals within the constraints of their financial situation. A CPA can help you compare the relevant options such as traditional long-term care insurance, hybrid long-term care insurance, Medicaid options or self-insurance. Be warned-- don’t wait too long to explore coverage options. Applicants over 70 years old run an increased risk of being denied long-term care insurance due to health issues.
When asked about the top three sources of client financial and emotional stress concerning outliving their money, healthcare costs (77 percent), market fluctuations (53 percent) and unexpected costs (50 percent) were cited as the top issues. Tomorrow’s unknowns are weighing on client’s minds today. For those nervous about market volatility, it is important to understand that markets will fluctuate wildly in both directions but have historically gone up over long periods of time. Checking your portfolio daily can tempt you to make short-sighted decisions that can easily derail an otherwise sound portfolio allocation.
Despite concerns about going broke, rising healthcare cost and market volatility, the overall retirement picture for clients of CPA financial planners is improving. When asked to compare their clients’ current situation to five years ago, half of CPA financial planners (50 percent) say their clients are more confident they’re ready for retirement. That outweighs the third (33 percent) that stated they find their clients to be less confident. Another 17 percent saw no change.