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April 22, 2024
The need for more services and advisors focused on retirement planning is a call that has been going out across the financial services industry for years now, and it’s in no danger of slowing down.
Research including The College’s own 2023 Retirement Income Literacy Study suggests troubling knowledge gaps in the average American’s understanding of retirement planning, with 74% of consumers ages 50 to 75 failing a test of basic retirement knowledge. Another industry survey, the 2023 National Retirement Risk Index, predicts 51% of today’s working-age households will be unable to maintain their pre-retirement lifestyle once they leave the workforce.
To meet this moment, The College has named focusing on retirement as one of our 2024 strategic priorities: ultimately, to become the industry’s leading source of knowledge on retirement planning. There are many opportunities to do so, according to Sandy Herzlich, vice president of retirement strategy – but first, one has to challenge the notion that simply having a large nest egg is the solution.
“There are different levels of satisfaction in retirement, and different goals depending on the person,” he says. “Retiring with a lot of money alone isn’t a recipe for success. Because of this, retirement planning is going to be a much more relationship-driven business moving forward. Advisors need all the expertise, but they also need to couple that with layering in more personal aspects: understanding what their clients’ goals are and what potential roadblocks could stand in their way. They’re not just a financial manager; they’re a true partner.”
That understanding is critical to this time and place, according to Eric Ludwig, PhD, CFP®, our Retirement Income Certified Professional® (RICP®) Program director. He cites the common industry consensus that the Baby Boomer retirement wave is cresting in 2024, with roughly 12,000 Americans turning 65 every day.
“The number of Boomers retiring has been growing every year as that generation ages out of the workforce, but this year, more of them will be entering retirement than ever before or likely ever will again,” Ludwig says. “People are living longer than programs like Social Security were ever intended for, and it’s stretching resources all over the place.”
Because of this, Ludwig agrees that the psychology of retirement planning is a subject of paramount importance, and one he plans to incorporate even more into the RICP® Program curriculum over time.
“As human beings, our minds are not well-adapted to deal with uncertainty, and with all the options available and changes going on today, so much of retirement planning is fundamentally uncertain,” he says. “Advisors may think they can address these concerns with spreadsheets and calculations, but once you get started, you realize it’s more about relationships and trust than anything.”
Ludwig’s and Herzlich’s assertions follow the numbers: in The College’s 2023 Retirement Income Literacy Study, researchers found a clear correlation between lower client anxiety about retirement planning and the presence of a qualified, competent advisor. In all, nearly 11 points could be added to a respondent’s retirement knowledge score if they had working relationship with an advisor – data Ludwig calls evidence of a “significant positive benefit.”
Read the full article and learn more about The College’s impact on the retirement planning field today, as well as new initiatives in the works to address this growing need, in our 2023-2024 President’s Report.
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