More than a third of Baby Boomers surveyed said they expect Social Security to be a "major source of income in retirement." Yet only one in four have confidence the system will have money to pay benefits throughout their retirement; nearly 40 percent were not at all confident, according to the latest MFS Investing Sentiment Survey.
Moreover, most investors recognized the importance of personal savings and investments in funding their retirements, ranking it higher than all other sources cited. Yet Baby Boomers, who at the median are only 8 years away from retirement, have very little saved for retirement; only 12 percent of respondents had $1 million or more saved in retirement accounts, and the median balance was $314,000.
"The survey findings point out a big disconnect between what investors say they plan to live on in retirement, and what they actually can count on for that income. Advisors have an opportunity to help their clients focus on solving for this critical shortfall before it's too late," said William Finnegan, senior managing director and head of Global Retail Marketing for MFS.
When asked how they plan to make up for any financial shortfall in retirement, the most popular answer among all investors was to cut back on spending. The second choice among baby boomers was to work part time in retirement, followed by delaying their retirement age. Options for trying to increase the amount of money they have in retirement – including increase the amount saved and take more investment risk – ranked lower among their choices.
Among major concerns cited by investors as to what may impede their ability to retire comfortably, half cited a significant rise in health care costs (10 percent or more). Only a deep recession in the US economy or a substantial cut in Social Security benefits ranked higher among their concerns.
But in terms of dealing with this potential threat to their retirement, respondents in general were far more likely to say they have adjusted their lifestyle to stay healthy than to respond that they would save more for emergencies or increase health care coverage. Despite their age, Baby Boomers were far more likely to have adjusted their lifestyle (63 percent) than to have saved more for emergencies (44 percent).
"While pursuing a healthy lifestyle is laudable, it is far from a risk-free strategy in terms of the health of your retirement," Finnegan said. "People can lose their jobs or suffer catastrophic health issues at any time, regardless of their lifestyle. Unanticipated events like these can obviously put a damper on their ability to control when they retire and their ability to work in retirement, if that had been their plan. When dealing with these issues of financial shortfalls in retirement, it's simply not realistic to say, 'Oh, I plan to work longer,' or 'I plan to stay healthy.'"
MFS issued findings from its prior survey earlier this year, as well as from three previous waves of research conducted during 2011. Please reference the following press releases for prior survey results:
Wave 4: May, 2012: Complexity
of Investment Products Overwhelming Investors
Wave 4: April, 2012, Inflation Concerns Growing
Wave 3: January 2012, The Wall of Worry Continues to Grow
Wave 3: November 2011, Advisors' Growing Pessimism
Wave 2: September 2011, Generation Y Investing Sentiment
Wave 2: August 2011, Investors' Use of and Perceptions of Cash
Wave 1: May 2011, Pessimism Permeates Mass Affluent
Wave 1: April 2011, Investing Challenges for Gen XY and Baby Boomers
Wave 1: March 2011, Investor and Advisor Perception Disconnects
Editor's Note: please see attached info graphics; contact MFS for additional file formats.
About the current survey
MFS, through Research Collaborative, an independent research firm, sponsored an online survey from August 29 to September 10, 2012, of 923 individual US investors with $100,000 or more in household investable (non-retirement) assets and 603 licensed US financial advisors (either FINRA or SEC) who have been licensed for at least three years with $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. MFS was not identified as the sponsor of the survey. Generation Y investors are those under the age of 33; 193 participated in the survey. Generation X is defined as investors between the ages of 33 and 47; 256 participate in the survey. Baby Boomer investors are those between the ages of 48 and 66; 301 participated in the survey. There were 173 participants over 67 years of age.
About MFS Investment Management
MFS is a premier global money management firm with investment offices in Boston, Hong Kong, London, Mexico City, São Paulo, Singapore, Sydney, Tokyo and Toronto. The firm’s history dates back to March 21, 1924, and the establishment of the first US “open-end” mutual fund. MFS manages $303.4 billion in assets on behalf of individual and institutional investors worldwide, as of September 30, 2012. Please visit mfs.com for more information.
MFS Investment Management, 500 Boylston St., Boston, MA 02116
John Reilly, 617-954-5305
Dan Flaherty, 617-954-4256