Pension & Benefits News Employees close to retirement greatly worried about managing retirement income/savings
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Monday, March 9, 2020

Employees close to retirement greatly worried about managing retirement income/savings

By Pension and Benefits Editorial Staff

Pre-retirees (those who are within five years of retirement) are nearly as anxious about what the future looks like as the present, with 65% feeling overwhelmed by saving enough now for retirement and 52% feeling overwhelmed by how they will ultimately manage their different income sources once they retire, according to new research released by Charles Schwab. These findings reveal that the final years leading up to retirement are among the most sensitive and confusing in investors’ financial lives.

Managing retirement income overwhelming. Most pre-retirees consider managing retirement income more overwhelming than many other financial moments typically considered stressful, such as:

  • Bearing the financial impact of losing a job - 41% consider overwhelming
  • Buying a home - 33% consider overwhelming
  • Paying for college - 27% consider overwhelming.

Pre-retirees are particularly anxious about how they will manage their income and spending needs when they move from paychecks into retirement:

  • 72% are worried about running out of money in retirement
  • 57% are overwhelmed by determining how much they can spend in retirement
  • 60% are worried about not getting - or the thought of not getting - a regular paycheck in retirement
  • 64% are overwhelmed by not being able to maintain their current lifestyle or quality of life in retirement.

Planning for retirement income deemed complex. Schwab’s survey finds that people on the cusp of retirement are concerned about several aspects of how they will manage their money once retirement begins, including:

  • Managing different income sources and accounts in retirement (52% are worried)
  • Managing the tax implications of withdrawing from multiple accounts (54% find it difficult)
  • Knowing how to invest (50% find it difficult)
  • Projecting how long their savings will last (57% find it difficult)
  • Managing unexpected expenses (59% find it difficult).

Lack of familiarity with retirement income basics. Lastly, the survey finds that people within five years of retirement are unfamiliar or worried when it comes to some important basics about retirement income, which may add to their stress level:

  • Annual required minimum distributions (70% know nothing/not a lot about this topic)
  • Tax implications of retirement account withdrawals (70% know nothing/not a lot about this topic)
  • Fees (48% are worried about paying too much for advice on managing retirement income).

“So much of the emphasis around retirement planning is on helping people save, but helping them transition into spending down from their portfolios in retirement is just as important,” says Tobin McDaniel, Charles Schwab’s senior vice president of digital advice and innovation. “Millions of Americans are on the cusp of retirement, so developing solutions that enable investors to confidently manage their income needs in an easy, flexible and affordable way is one of the most critical challenges we are addressing.”

About the survey. The research was conducted through an online survey by Logica Research from June 27 to July 16, 2019, among a national sample of 1,000 Americans aged 55 and older with $100,000 or more in investable assets. Respondents self-defined as retired or within five years of retirement. The margin of error for the sample is three percentage points.

Source: Charles Schwab press release.

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