Retirees with a financial advisor end up with a lot more monthly income than those who don’t have one, says a new study from global investment manager Schroders.
The Schroders 2023 U.S. Retirement Survey found that retirees with a formal financial plan had monthly income of $5,810 on average, almost twice as much as the $3,000 a month reported by people without an advisor.
Overall, retirees on average had total monthly income is $4,170, including Social Security. Still, 37% said their monthly income is less than $2,500.
8 Acre Perspective conducted the survey for Schroders between February 13 and March 3 among 2,000 U.S. investors nationwide ages 27-79. It included respondents between ages 27-44 for the first time. The median household income for of working respondents was $75,000.
Worker anxieties
The overwhelming majority of working respondents were anxious about not having a paycheck when they retired. That thought was concerning to 57%, but terrifying for another 23%.
They also did not have a good understanding of the money they would need to maintain their standard of living. Only 23% believe they will need to replace 75% or more of their final paycheck with other sources of income in retirement. Thirty-two percent said between 50-74%; 23% said they needed to replace less than 50%; and 22% had no idea.
For retirees, about half (51%) are able to replace less than 50% of their last paycheck; 26% are able to replace 50-74%; and only 24% can replace 75% or more.
Income strategies
The strategies retirees use to turn savings into income include:
Systematic withdrawals from retirement accounts (33%)
Dividend-producing stocks or mutual funds (24%)
Annuities (13%)
Individual bonds or bond mutual funds (12%)
CDs (12%)
However, almost half (49%) said they don’t have any retirement income strategies; they just take money when they need it.
Social Security fears
Meanwhile, only 10% of working respondents said they’d wait until 70 to receive their maximum Social Security benefit payments. This includes 17% of non-retired respondents on the verge of retirement (ages 60-65).
Overall, 40% of non-retired respondents plan to take their Social Security benefits between 62-65.
Respondents agreed there were many reasons they would start Social Security benefits before 70:
44% said they were concerned Social Security may run out of money/stop making payments.
36% said they will need the money.
34% said it was their money and they wanted access to it as soon as possible.
13% said they were advised to take it earlier than age 70.
“We have a crisis of confidence in the Social Security system and it’s costing American workers real money,” said Deb Boyden, Head of U.S. Defined Contribution at Schroders. “Fear about the stability of Social Security has people walking away from money that could improve their quality of life in retirement. Many are not even waiting for their full benefit let alone the maximum, which means they will have to create more income on their own, making it even more important to save and invest earlier for retirement.”
