Most Americans Have No Financial Plan. The Ones Who Do Praise the Benefits.
Many investors say creating a financial plan is overwhelming and don’t see the benefit of having one because of life’s uncertainties. Advisors should remind them what clients have to say about their plan.
It’s an alarming statistic: Nearly 70 percent of Americans at or near retirement age have less than $250,000 in savings, according to a recent survey by Schroders, the London-based asset manager with nearly $1 trillion in assets under management
“We’re in really challenging times,” Joel Schiffman, head of intermediary distribution for North America at Schroders, told RIA Intel. “It is clear that more work needs to be done to close the gap between savings and having enough for retirement, never mind being comfortable.”
Formalized financial plans would help people save more for retirement. But 76 percent of Americans say they feel overwhelmed by the thought of creating one and 56 percent say life is too uncertain for a plan to have any value, according to a February survey of 1,000 investors across the U.S. between the ages of 45 and 75 by Schroders and 8 Acre Perspective. The median household income of those surveyed was $75,000 a year.
Perhaps unsurprisingly, less than a quarter (23 percent) of Americans have a written retirement plan, 40 percent have done some planning but do not have a formal one, and 37 percent have done no planning at all.
“The idea that so few [people] on a relative basis have a plan continues to underscore the need that it’s never too late to start a plan,” Schiffman said.
About a third of investors don’t have a financial plan when they become clients of Sage Wealth Planning, an RIA in Austin, Texas that charges 75 clients a flat, annual fee between $5,000 to $15,000 depending on their needs and manages $52 million in assets. But almost every new client gets a financial plan and benefits from having it, Sage Wealth Planning co-owner and financial planner Ethan Kok, told RIA Intel.
The results of the Schroders survey didn’t surprise Kok and he agreed with Schiffman that it’s never too late to create a financial plan.
“If you’re one of the people who have less than $250,000 saved for retirement, and you really feel like you need at least $1.1 million. Well, I think it’s the perfect time to reach out to a financial advisor,” Kok said.
A financial plan also helps a client determine how much they will really need to save. They might not need $1.1 million like they think. That information is valuable no matter how close someone is to retirement, or if they are retired already, Kok said.
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“I would much rather know at age 60 that I needed to work until 70 to retire than go on from age 60 not really knowing when I’m going to retire,” he said. Investors, especially those with a plan already, would agree — 91 percent of investors surveyed by Schroders who had a retirement plan said the plan was useful and 33 percent said it was critical to putting them on a better path to retirement.
Few Americans close to retirement feel they have enough money to retire. Only 22 percent surveyed in February felt they saved enough for retirement, down from 26 percent last year. Schroders has conducted the same retirement survey each of the last three years.
Americans are most worried about inflation and growing healthcare costs impacting their retirement.
A lot of people worried about expenses probably don’t need an ongoing financial advisor but they could benefit significantly from a one-time financial plan, Kok said. His company does about 10 one-off plans for people each year, a sort of diagnostic test of their finances.
“There’s this notion that to have a savings plan or an asset accumulation plan or even a decumulation plan, you have to have this big drawn-out plan, but it doesn’t need to be like that. I think there’s something lost in here about the need for something really profound for a plan as opposed to [just] have a plan,” Schiffman said.
Holly Deaton (@HollyLDeaton) is a staff writer at RIA Intel and based in New York City.
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