ready. set. retire. - voya financialready. set. retire. this study is a fresh look at the experience...

A Retirement Experience study from the Voya Retirement Research Institute.

Ready. Set. Retire.Exploring the path to – and through – retirement.

Ready. Set. Retire. This study is a fresh look at the experience of retirement for those individuals most closely engaged in it: the already-retired and the soon-to-be retired. In this study, we examine the experiences of both pre-retirees and retirees to evaluate their attitudes, behaviors, experiences and lessons learned as they plan for and live in retirement. Surveying these experienced and soon-to-be retirees reveals how individuals are navigating the shifting retirement landscape, identifies the challenges they’re facing and the tools they have found helpful, and provides ideas and suggestions for employers who are seeking ways to help employees be better prepared for their own retirement.

The Voya Retirement Research Institute partnered with Market Probe1 to study approximately 2,400 individuals, all of whom were aged 50 or older, half of whom were retired, and half of whom were within five years of their anticipated retirement date. Respondents came from a broad range of household incomes and ethnicities.

In this report…Ready. Set. Retire. ................................... 1

Expected sources of retirement income... ......................................................3

Retiree stresses and lessons learned .........................................4

Pre-retirees preview similar stresses and challenges ..........................................6

Perception vs. Reality .............................. 7

Employers can help with retirement guidance .....................................................9

Having a plan and working with a financial advisor ....................................... 12

Helping pre-retirees prepare now – for later ....................................................... 13 1 An independent market research firm (and not a member of the Voya Financial Family of Companies)

I 01

Retirement timeline and study participants

Pre-Retirees: Road to retirement Retirees: Life in retirement

4-5 years 2-3 years Within 1 year

36% 44% 20%

1,201: 51% women, 49% men 1,237: 53% women, 47% men

1 An independent market research firm (and not a member of the Voya Financial Family of Companies)

Total HH income last year, before taxes

$25,000 –$39,000

$40,000 –$49,999

$50,000 – $59,999

$60,000 –$74,999

75,000 –$99,999

$100,000 –$149,999

$150,000 –$199,999

$200,000 or more

Pre-Retired: Retired: � �

1%

0

5

10

15

20

25

02% 2%

13%15%

23%

19%20%

24%

20%22%

11%9%

11%

6%

Pre-RetiredRetired

��

Within 5 years 6-10 years 11+ years

36% 44% 20%

Age: 50+RETIRE

Ready. Set. Retire. Retirement, by its very definition, represents the “end” of work and the beginning of a new phase that many spend their whole lives looking forward to. But over the last decade, older workers have witnessed changes that have quickly reshaped the traditional economic foundations for a secure retirement. Today’s retirees are experiencing a retirement that is likely to be quite different from the one that future retirees may live – even for those who are on the very cusp of retirement.

Future retirees face circumstances and decisions that are resulting from a changing workplace and social infrastructure. It’s evident that their prospects for being able to count on an employer pension, for making decisions about Social Security, for their ability to save and invest successfully prior to retirement, are much more complex and far less predictable than those of today’s retirees.

Still, the unexpected challenges and lessons faced by today’s retirees can help inform those who are preparing for retirement tomorrow. What steps can they take now to improve their retirement readiness – and increase their confidence in achieving their ideal vision of retirement?

Highlights from this Study:• Fifty-seven percent of retirees faced unexpected challenges and stress in

retirement; managing their finances has proven to be as great a challenge as dealing with unexpected health issues and trying to fill their newfound free time. Nearly 80% of early retirees report having more stress than they did pre-retirement, with health and financial concerns topping their reasons for increased stress.

• More than half (60%) of pre-retirees report increasing levels of stress leading up to retirement, mostly due to financial challenges. More than a quarter (26%) of pre-retirees in the study reported that they either live paycheck to paycheck or are struggling financially.

• The recent reduction in pensions and defined benefit plans has put increased financial pressure on the expected retirement income of today’s pre-retirees. Only 33% of pre-retirees expect a pension to be a top source of retirement income vs. over half of retirees. Nearly three-quarters of pre-retirees expect that savings from a work place retirement plan will be one of their primary sources of retirement income, and nearly one in four pre-retirees expect that working in retirement will provide a major source of income in retirement.

• Despite their financial concerns and challenges, most pre-retirees (72%) report that while their employer or retirement plan provider offers financial and investment advice, only half (54%) have taken advantage of this service. Nearly half of pre-retirees express interest in getting advice on key aspects of planning for retirement that could help them be better prepared, including developing a retirement income strategy, planning for healthcare expenses and creating a monthly income stream from their retirement savings. But many more could be taking advantage of these services to help them be better prepared for retirement.

• More than 90% of retirees and pre-retirees in the study who requested and received retirement planning advice from their employers found that advice to be helpful. Compared to those who have not taken advantage of these services, pre-retirees who have a plan to manage or generate retirement income – as well as those who work with a financial advisor – report higher levels of retirement savings and greater confidence in achieving their ideal vision of retirement.

02 I

Expected sources of retirement income – the great differentiatorWhen it comes to retirement income, retirees are more financially comfortable and stable than pre-retirees are – or expect to be. When looking at the top three sources of current or expected retirement income, it is clear that today’s retirees benefit from more predictable sources of income in retirement than future retirees expect to rely on during their own retirement.

• More than half (53%) of retirees report a pension as a primary source of retirement income vs. just 33% of pre-retirees.

• Nearly three quarters (74%) of pre-retirees say that savings from a workplace plan such as 401(k) will be a primary source of retirement income, while only 34% of retirees report the same.

• Almost six in ten (57%) of pre-retirees expect to rely heavily on their other personal savings for retirement vs. only a third (34%) of retirees.

• Nearly one in four (24%) of pre-retirees expect that working in retirement will be a primary source of income, while only 11% of retirees report having to work for income.

• Pre-retirees also report expecting to have retiree healthcare benefits from an employer at much lower rates than current retirees currently do (29% for pre-retirees vs. 52% for retirees.)

I 03


0 20 40 60 80 10033%

53%86%

85%74%

34%35%

45%34%

57%24%

11%

What are your top three sources/planned sources of retirement income?

Pension

Social Security

Savings from workplace plan(s), like a 401(k), SEP-IRA, or KEOGH plan

IRAs or other accounts

Other personal savings for retirement (e.g., brokerage accounts, bank

accounts, etc.)

Working in retirement

Retiree health benefits from an employer for coverage during retirement

Pre-Retired Retired

60%

40%

20%

0


29%

52%

Pre-RetiredRetired

��

Historically, workers young and old have looked forward to retirement as a time when they can finally relax, be free of the daily stresses of work and take advantage of their newly-free time to pursue favorite activities. But many retirees in the study reported higher levels of stress and dealing with concerns that carried over with them into retirement.

• More than 80% of recent retirees (in their first five years of retirement) report having more stress than they did during the years preceding their retirement. More than half of these retirees report both health and financial concerns as the top reasons for this increase in stress.

Retiree stresses and lessons learned

04I

Expect/experience reduced stress in retirement Pre-Retired: Retired: � �

77% 81%

0

20

40

60

80

10078%

87%75% 77%

4 – 5 years 2 – 3 years <1 years <5 years 6 – 10 years 11+ years

Pre-retiree Retiree

Pre-RetiredRetired

��

I 05

35%

40%

22%

38%

38%

18%

19%

24%

9%

Retirees: �

What have been the biggest unexpected challenges in retirement so far?

Dealing with or paying for unexpected health issues

How to invest and manage my investments

Helping support/ take care of children, grandchildren

How to spend my time

How to manage retirement income from my savings

Helping support/take care of parents

How to stay active

Knowing where to go for trusted investment and financial advice

Wanting to work but having difficulty finding employment

• 57% of retirees report that they faced unexpected challenges in retirement. For many, concerns around continuing to manage their retirement savings and investments ranked as high as dealing with/paying for unexpected health issues or determining how to spend their newfound abundance of free time in retirement.

06 I

The stresses and concerns of today’s pre-retirees reveal that they are already wrestling with some of the challenges that retirees faced when transitioning into retirement. Pre-retirees are feeling the stress and anticipating the need to be more self-reliant and financially prepared for retirement while also grappling with their present-day needs and challenges.

• Pre-retirees already report higher levels of stress in their current lifestyle. More than half of pre-retirees report feeling very/somewhat stressed vs. less than a quarter of retirees.

• Twenty-six percent of pre-retirees either live paycheck to paycheck or are struggling financially vs. just 5% of retirees who report having similar financial challenges.

• Pre-retirees report expecting to need a higher percent of their working income in retirement than current retirees are living on. More than 70% of pre-retirees expect to need between 70-100% of their working income in retirement, while over 40% of retirees report needing less than 60% of their pre-retirement income to live comfortably vs. only 30% of pre-retirees.

Pre-retirees preview similar stresses and challenges

How stressful is your current lifestyle?

62%54%

01020304050607080

61%

15% 17%23%

4 – 5 years 2 – 3 years <1 years <5 years 6 – 10 years 11+ years

Pre-retiree (years to retirement) Retiree (years post retirement)


1%

0

5

10

15

20

25

30

35

16% 16%

27%

22%

28%

19%

25%

34%

5%

9%

How much of your pre-retirement income do you expect to/need to live on in retirement?

Pre-RetiredRetired

��

90%+ 80% 70% 50%-60% <50%

Perception vs. reality: barriers to living the ideal vision of retirement

Looking ahead, how likely is it that you will achieve your ideal vision of retirement?

When it comes to living their ideal vision of retirement, it’s clear that retirees have come closer to achieving this goal than pre-retirees expect to as they approach retirement. Looking at the top five reasons that get in the way of living their ideal vision of retirement, a good percentage of both retirees and pre-retirees cite recent financial challenges that have gotten in the way of achieving this goal.

• Just over one quarter (28%) of pre-retirees are confident that they will be able to live their ideal retirement life. When citing the reasons that will get in the way of living their ideal retirement, over half cite not having enough money saved or needing to continue working longer than they expected. Forty-three percent (43%) also report that the value of their retirement savings has dropped considerably in the past five years, leaving them without sufficient savings to live the retirement life they’ve dreamed of.

• Retirees are more likely to be living their ideal vision of retirement, with 40% reporting they are living very close to the retirement they had envisioned. Top reasons cited for not living their ideal vision of retirement relate to dealing with health issues for themselves or their spouse. While at a much lower level than for pre-retirees, 27% of retirees also report the value of their retirement savings having dropped considerably over the last five years as a reason for not living their ideal vision of retirement.

SM

LG

LV

BD

SM

LG

LV

BD

1%

28%

63%

7%

SM

LG

LV

BD

SM

LG

LV

BD

2%

40%

50%

7%

Pre-retirees Retirees

g Very likelyg Somewhat likelyg Not very likelyg Not at all likely

g Very close g Somewhat closeg Not very closeg Not at all close

Pre-Retirees: Looking ahead, how likely is it that you will live your ideal vision of retirement?

I 07

Retirees: How close are you living to your ideal vision of retirement?

08 I

Pre-retirees: What gets in the way of living the ideal retirement

I haven’t saved enough 65%

I will need to continue working longer than expected 53%

I won’t have enough money saved to afford retirement 51%

Value of my retirement savings has dropped considerably in the past five years

43%

I am in too much debt 18%

Retirees: What gets in the way of living the ideal retirement

I have health issues 41%

My spouse has health issues 34%

I don’t have enough money saved to be able to afford retirement 30%

Value of my retirement savings has dropped considerably in the past five years

27%

I have to support my children 18%

Perception vs. reality: barriers to living the ideal vision of retirement continued

I 09

Given the challenges many pre-retirees and retirees face, help from either their employer, retirement plan provider and/or a professional financial advisor could be a welcome source of support in planning and preparing for retirement. While pre-retirees and retirees reported different levels of access to this kind of planning assistance, those who sought out and took advantage of getting help with retirement planning clearly found this assistance to be very helpful.

• Holistic financial guidance is a relatively new benefit available to employees; 72% of pre-retirees report that their employer or its workplace retirement plan provider offered these services vs. only 45% of retirees.

• When asked what advice they wished their employer or workplace retirement plan provider would offer, nearly half of pre-retirees indicated they would like help with developing a retirement income strategy, planning for healthcare expenses in retirement and creating a monthly income stream from their savings for retirement. Retirees also expressed interest in these services.

Employers can help with retirement guidance & holistic financial planning


72%

45%

21%

50%

7% 5%0

10

20

30

40

50

60

70

80

Does/did your employer or its workplace retirement plan provider (e.g., 401(k) or similar plan) offer financial/investment guidance regarding your overall financial life?

Yes No Don’t know

Pre-RetiredRetired

��

• Of those who accessed Holistic financial planning services from their employer or workplace plan provider, 72% of retirees reported they used these services vs. only 54% of pre-retirees.


49%41%

48%32%

47%31%

30%35%

29%

28%

23%

0.00.20.40.60.81.0

0% 10% 20% 30% 40% 50%

23%

35%

What advice would you like/do you wish your employer or its workplace retirement plan provider to offer/had offered?


54%

72%

46%

28%

0

10

20

30

40

50

60

70

80

Do you ever use the financial/investment guidance provided by your employer or its workplace retirement plan provider?

How to develop a retirement income strategy; how much I should take from my 401(k) plan

How to plan for healthcare expenses in retirement

How to create a monthly income stream from my retirement savings after I retire

Where or how to invest/allocate my savings

How much I should be saving/should have saved for retirement/savings goals

How to prioritize financial goals

Yes No

10 I

Pre-RetiredRetired

��

57%51%

53%42%

52%31%55%35%

24%

17%

23%

0.00.20.40.60.81.0

0 10 20 30 40 50 60

20%

What advice did you seek?


98%97%

96%94%

92%93%

94%90%

0.00.20.40.60.81.0

0% 20% 40% 60% 80% 100%

39%35%

How helpful was this advice?

How much I should be saving for retirement/ savings goals

How to develop a retirement income strategy: how much I should take from my 401(k) plan,

Social Security, pension, etc., to ensure my savings lasts




How much I should be saving for retirement

How to develop a retirement income strategy: how much I should take from my 401(k) plan,

Social Security, pension, etc., to ensure my savings lasts




I 11

Pre-RetiredRetired

��

• Nearly or more than half of the pre-retirees and retirees who took advantage of financial planning services from their employer or retirement plan provider sought advice on how much to be saving for retirement, how to develop a retirement income strategy and how to invest or allocate their retirement savings.

• For both pre-retirees and retirees who obtained advice on these topics, more than 90% reported they felt that this advice was helpful.

Managing multiple income sources, understanding Social Security rules and regulations, anticipating healthcare needs and costs, planning income and expenses over time – today’s retirees and pre-retirees must navigate and make decisions about an increasingly complex range of choices to create a plan for retirement that will meet their unique needs, wants and wishes – and give them the confidence that they will be able to live the way they choose to through the end of their lives. There is evidence that indicates those who seek the help of a financial advisor and create a plan to manage and generate income are more financially prepared and mentally ready to take on retirement.

• Pre-retirees who have a plan to manage or generate retirement income – or have worked with a financial advisor – report higher levels of workplace retirement savings, other retirement savings and total household investable assets compared to those who have no plan or do not work with an advisor.

Having a plan and working with a financial advisor may improve retirement readiness

Before retiring, how much in total have you saved?

0

200

400

600

800

1000

Mean reported savings/assets

$1,000,000

$800,000

$600,000

$400,000

$200,000

$0

$658,375$553,763$994,442

$308,757$292,631$449,736

$648,844$569,802$979,797

$377,632$335,828$551,161

$638,858$566,528$896,972

$390,773$331,195$602,506

n n Workplace retirement savingsn n Other retirement savingsn n Total HH investable assets

Yes No Yes No Yes NoHave plan to generate income in retirement

Have plan to manage income in retirement

Have an advisor

12 I

Helping Pre-retirees prepare now – for laterClearly, the quality of life that today’s retirees enjoy will be much more difficult for tomorrow’s retirees to duplicate. The realities of today’s economy will continue to put pressure on the programs and policies that many people have historically counted on to help support themselves in retirement. Fortunately, today’s pre-retirees have greater access and opportunity to get the advice and guidance they need to help improve their retirement readiness.

Employees are looking to their employers and workplace retirement plan providers for help with planning and guidance. By offering these services, and encouraging their employees to take advantage of them, employers are in an excellent position to help improve the retirement readiness of many pre-retirees – and to help even younger employees start taking the steps that will help them prepare for a future retirement that may require even greater self-reliance.

The challenges of preparing for retirement are top of mind for younger and older employees alike. Employers, retirement plan providers and financial advisors who can help provide guidance, offer knowledge and support decision-making are likely to earn the gratitude – and loyalty – of these future retirees.

Looking ahead, how likely is it that you will achieve your ideal vision of retirement?

41%

16%

43%

0%

10%

20%

30%

40%

50%

18%

Responded very likely

Yes No Yes No

Have plan to generate income in retirement

Have plan to manage income in retirement

I 13

• Perhaps as a result of their improved financial outcomes, pre-retirees who have a plan to manage or generate retirement income are two and half times more likely to respond that they are very likely to achieve their ideal vision of retirement vs. those who do not have a plan.

Voya.com

171047 3034848.I.G © 2014 Voya Services Company. All rights reserved. CN0609-18873-0716

This paper has been prepared by the Voya Retirement Research Institute for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary are subject to change without notice based on market conditions and other factors. The information provided is not a recommendation to buy or sell any security.

Products and services offered through the Voya Financial family of companies. Please log on to http://ing.us for information regarding other products and services offered through the Voya family of companies. Not all products are available in all states.

Additional copies of this report can be downloaded at the Voya Retirement Research Institute: www.VoyaRetirementResearch.com, select “Publications”

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