Retirement: A Cause for Concern & Opportunity for Advisors

Advisors know all too well that many clients are facing retirement conundrums and a slew of polls, studies, surveys and the like over the past few years confirm as much.

Thorny retirement issues are being exacerbated by persistently high inflation. On Thursday, the Bureau of Labor Statistics (BLS) said the September reading of the Consumer Price Index (CPI) was 8.2%, up 0.4% from a year earlier. Compounding those woes, wages declined 0.1% month-over-month and 3% year-over-year when adjusted for inflation.

The September CPI reading likely means the Federal Reserve will unveil at least one more, probably two, interest rate hikes before the end of this year. That likely means more headwinds for already beleaguered bonds, which is problematic for retirees looking to reduce portfolio risk.

Indeed, retirement risks abound, but that also means there’s plenty of opportunity for advisors to add value while fostering improved relationships with clients.

Goldman Survey Is Meaningful

The 2022 installment of the Goldman Sachs “Retirement Survey & Insights Report” is instructive for advisors because it sheds light on clients’ concerns and all-important demographic trends. Not surprisingly, in this edition of the survey, confirms clients are increasingly concerned about the scourge that is inflation.

“Retirees face a confluence of factors in retirement that can affect their ability to generate income. They report that they are most concerned about inflation (71%), meeting future healthcare needs (51%) and potential reductions in Social Security (46%),” according to Goldman Sachs.

Regarding Social Security, it’s cruising toward its largest ever benefits increase due to inflation, which is somewhat good news for current recipients. Still, the data confirm 51% of respondents believe they don’t have enough income in retirement.

“Reaching retirement with sufficient savings is a challenge that is only getting more difficult for working generations. Unfortunately, many fall short of the savings they need to generate income for a comfortable retirement,” notes the survey.

While retirement income is an issue advisors deal with regardless of the macroeconomic environment, the Goldman survey confirms advisors should remain diligent on this front because it’s clearly a priority for clients.

Demographic Data

As is often noted, advisors need to be more aware of demographic trends and tailor advice and relationships to specific groups. That includes the overlooked goldmine that is Gen X. Nearly two-thirds of that group are stressed about retirement planning and half feel they’re behind on retirement savings.

“Generation X is often viewed as the forgotten generation, bridging Boomers and Millennials, and can be overlooked when addressing the financial challenges each generation must navigate. Now they face a tumultuous macroeconomic backdrop as their time to close any savings gap continues to narrow,” notes Goldman Sachs.

That feeds into an important point: 95% of respondents queried by Goldman – regardless of age group – believe financial advice is vital when it comes to retirement planning, confirming advisors today are as relevant as ever.

“The challenges with saving for retirement over a 40-year career has driven the need for financial help (counseling, advice and guidance). For those offering retirement plans today, providing financial help that is both broadly available and personalized to support individual circumstances is an important plan design consideration,” concludes Goldman.

Related: Dividends Still Dependable for Inflation Protection