Is the United States speeding towards a retirement crisis or not?
Well, Wayne Park, CEO of John Hancock Retirement, won't go that far, but definitely believes the “check engine light is on.”
Park’s concern is based on the firm’s recently released financial resiliency and longevity report which showed half the respondents feeling like they're falling behind in retirement saving, while another 40 percent said their financial situation was fair or poor. Meanwhile, the survey said the average respondent thinks they're going to be working an additional four more years than they originally planned.
The real revelation, however, came from current retirees who stopped working six years earlier than they thought they would, according to Park.
“It was not because they won the lottery or a windfall, but because of health reasons or employment reasons. So, that's a cause for concern for sure,” Park said.
Despite his trepidations, Park said he does see some “green shoots” on the horizon based on the research, primarily the fact that the situation has improved since last year, likely due to easing inflation.
Breaking the data down by generation, Park said the Boomers proved to be the most confident in their ability to retire, likely because they were closest to it.
“Most respondents feel like their retirement is a priority, yet just north of 25 percent feel like they're on track. And that's definitely the story for the Gen Xers, Gen Zs and millennials,” Park said.
As to what these younger generations need to be doing in order to stave off their own personal retirement crises, Park said they need to maximize the most important asset they have: Time.
“Get your budgeting right, get your cash flow right so that you can use the power of compounding over the long time period that you have,” Park said.
When it comes to Social Security, which along with pensions and personal savings make up the three-legged stool of retirement income, Park said it also depends on the respondent’s generation as to whether they are counting on it being available.
“For the time being there's no indication that we'll have issues regarding the solvency of Social Security,” Park said. “But the one emerging worry I do have for decades later is the birth rate on top of people living longer. Our birth rate has declined because it's the younger generations that have to invest and pay for the Social Security down the road. But that's decades later, so hopefully it will still be there for all of us.”
Finally, Park said he believes financial advisors can play a vital role in preventing a true retirement crisis from striking. Nearly 80 percent of those with an advisor said they were in a good financial situation, compared to 52 percent without, according to the survey. Furthermore, 45 percent of those with an advisor reported being on track for retirement savings compared to 26 percent who did not work with one, the survey said.
“Having access to a financial advisor and financial advisors looking at the full picture, building that rapport and personalizing a plan for their clients is a really important step,” Park said.
By listening for what truly matters and where clients want to make a difference, advisors can avoid politics and help build more personal strategies.
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