Value of a financial adviser clear, questions remain about Social Security: Study

Planning with the assistance of a professional helps retirees feel more confident, but there's still uncertainty about Social Security benefits.

It helps to have the help of a financial adviser during times like these — especially when it comes to preparing for retirement.

Financial planning with the assistance of a professional overwhelmingly helps savers feel more confident about retirement than those who don’t seek help, according to the 2022 Retirement Risk Readiness Study from Allianz Life Insurance Co. of North America.

Those working with a financial professional feel more prepared in terms of saving enough in a retirement account (74%) compared with those who have never spoken with an adviser (51%), according to Allianz. Along those lines, savers consulting an adviser are more likely to find a balance between saving for retirement and spending to enjoy life now (67%) versus those going it alone (47%).

Similarly, the study reveals that savers working with a financial adviser believe they are more prepared to take income in retirement (65%), as opposed to those not seeking financial help (52%).

And when it comes to inflation, those savers employing an adviser feel they are better prepared to address the rising cost of living (60%) than those not consulting an adviser (40%), according to the Allianz Life survey.

“So many Americans are in a vulnerable spot right now with their finances, it’s encouraging to see the high value placed on not only the practice of financial planning, but also the guidance of a financial professional,” said Kelly LaVigne, vice president of consumer insights at Allianz Life.

“The pandemic changed a lot of expectations around finances and creating a retirement strategy, so now is the right time for financial professionals to understand, adapt, and meet clients where they are,” LaVigne said.

The 2022 Retirement Risk Readiness Study surveyed three categories of Americans to get different perspectives on retirement: pre-retirees, who are 10 years or more from retirement; near-retirees, who are within 10 years of retirement; and those who are already retired.

Longevity risk proved to be a major concern for respondents regardless of their life stage. Over four in 10 (44%) of those surveyed said making sure they have enough money to last a lifetime is one of the most important things financial professionals can do to help.

“Retirement is a major life change, one that you mentally prepare for over time. We find that people who engage with a financial adviser have portfolios that have also been anticipating and preparing for this major life shift well in advance,” said Melanie Jones, senior vice president at Evoke Advisors. “Many have developed a financial plan to understand their income needs in retirement, have done exercises to understand their risk tolerance, and have more truly diversified portfolios.”

BIG QUESTION OF SOCIAL SECURITY

Another key finding from the study was that about six in ten (59%) near-retirees say they plan to work past the current Social Security retirement age. However, only one in ten (11%) current retirees actually did so.

Furthermore, over half of near-retirees (57%) expect to take benefits at full retirement age or defer to a later age, whereas only four in ten (46%) retirees did so, according to the study. Additionally, only one-third (33%) of near-retirees plan to take Social Security benefits before full retirement age, while in reality, nearly half (49%) of current retirees had to take their benefits early, limiting their maximum benefit.

The big misconception revolves around the role Social Security will play in a retiree’s income strategy. According to the study, more near retirees (40%) and pre-retirees (35%) believe that people will get enough from Social Security to meet their needs in retirement, while only 10% of retirees said this is true.

“Often people looking to retire go from a full-time job to full retirement. Making a longer transition out of the workforce will make it easier, especially during market pullbacks,” said Ben Dunbar, managing partner at Gerber Kawasaki Wealth& Investment Management. “Every little extra income and delay in drawing from portfolios make a material difference.”