A “significant number” of Americans are taking a break from retirement, according to a new study commissioned by Allspring Global Investments.
The 21st annual Allspring survey found that almost one in eight retirees have opted to become “unretirees” by returning to work. More than half of those, 57%, are working part-time, but 83% say they are working by choice, not necessity.
The Allspring report doesn’t offer insight into why some retirees choose to return to work even though they say they do not need to. However, it says unretires have lower household incomes, less education and lower expected need for retirement income. About 40% of unretirees returned to work within the past year, according to the survey.
“Unretirement adds an important buffer to their retirement outlook, even when they return to work by choice,” the authors say of the findings.
But retirees can fail to notice that they are rapidly depleting their savings, especially later in retirement, according to the authors. “Advisors can address this risk by applying guardrails early on and course correcting when necessary so that the unretirees are truly continuing to work on their own terms,” they say.
The survey, conducted last September by Escalent, queried 1,515 adults who are primary or joint household financial decision-makers — 752 near-retirees (average age of 61) and 763 retirees (average age of 70). For the first time, the survey also included 320 advisors.
Near-retirees and Retirees Aren’t as Ready as They Think
With that addition, the survey found a disconnect between the perceptions of advisors compared with near-retirees and retirees regarding retirement readiness. According to the report, 64% of near-retirees and retirees say they are on track for retirement. Only 40% of advisors agree.
The gaps in perception are much greater when retirees and near-retirees rate themselves as knowledgeable on aspects of retirement.
For example, on Social Security, 44% of near-retirees rate themselves knowledgeable, and 54% of retirees give themselves passing grades. But only 8% of advisors believe investors have the requisite knowledge. The numbers are similar when retirees and near-retirees rate their knowledge on Medicare planning and personal finance.
Commenting on those findings, the authors offer this advice to advisors: “Become the retirement go-to before retirement. When advisors engage younger investors, they help foster good financial habits and pave the way for being a trusted source later in life.”
The survey found that almost 60% of near-retirees know that their 401(k) or 403(b) plan offers advisory services, and 47% are just as likely to work with an advisor associated with the plan as with another advisor.
According to the report, although 62 is the average age of retirement, those who have retired and advisors say that age 65 to 69 is a good range for retirement.
Retirees ranked factors they say determine the “right” age: financial resources (47%); health and time to enjoy retirement (25%) and job satisfaction (14%).
Among retirees, 37% say they retired sooner than expected, and 6% retired later than expected.
Happiness with Retirement
Nevertheless, 85% of retirees surveyed they are happy with the age they chose for retirement, and 69% say retirement is better than expected. Additionally, the authors state, on average, retirement spending could decrease 25% before happiness would be significantly impacted.
Among those who say they retired too early, 37% were forced to retire, and only 21% say they had enough savings.
There is a difference of opinion about the amount of savings needed for retirement. Near-retirees put the number at $1.6 million, whereas retirees say only $1.1 million is needed.
Among near-retirees with defined-contribution plans, the preferences for funds are: a menu of funds (52%), professionally managed accounts (31%) and target date funds (17%).
The study found that about 75% of near-retirees and retirees moved money to stable or fixed-income investments last year.
“The average defined contribution plan has three stock funds to every bond fund,” the authors write. “Near-retirees and retirees need more options for capital preservation and income generation. Better investment options plus better planning can lead to better outcomes.”
The authors say advisors can help near-retirees to focus on the aspects of retirement they can control.
Among advisors and investors, the top three concerns are, in order of importance: inflation, investment performance and tax increases.
“I retired before I was 100% eligible for my pension,” says one unnamed retiree quoted in the report. “I also started drawing my Social Security at age 62 and should have waited until at least 65. Both of those events have caused me to fall seriously behind when it comes to keeping up with rising prices of housing, groceries and transportation.”
In a four-decade career in journalism, Ed Prince has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News Tribune.
