Research focuses on pre-retiree segment within five years of retirement facing difficult financial pivot point
Charles Schwab released new research today that provides insights into people at a unique point in their financial lives: those who are within five years of retirement. The findings show that these pre-retirees 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 take the leap into retirement.
These findings underscore how daunting the transition into retirement is for pre-retirees, revealing that the final years leading up to retirement are among the most sensitive and confusing in investors’ financial lives.
Retirement is More Overwhelming than Other Financial Moments in Life
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 feel particularly anxious about how they’ll manage their income and spending needs once they move from the comfort of an ongoing paycheck 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’ll 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)
Pre-Retirees Unfamiliar 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 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."
Overcoming Retirement Income Complexity
To help meet the needs of people making the transition to retirement, Charles Schwab recently launched Schwab Intelligent Income™, an income solution designed for people who want a simple, modern way to pay themselves in retirement, or any other time, from their investment portfolios.
Schwab Intelligent Income helps answer critical and often complex income-related questions about how much to withdraw, how to invest based on individual goals, risk tolerance, and time horizon, and how to withdraw from a combination of taxable, tax-deferred, and Roth enrolled accounts in a tax-smart and efficient way.
Using Schwab’s automated investing service Schwab Intelligent Portfolios® for portfolio management, Schwab Intelligent Income projects, manages and automates multiple income streams from enrolled accounts with the goal of generating a predictable ongoing withdrawal based on an investor’s income needs.
Among the findings in Schwab’s research, nearly three in four people (73%) within five years of retirement are comfortable using technology to automatically manage their retirement income needs.
More information about Schwab Intelligent Income is available here.
About the Research
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.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.
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Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs.
Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ are made available through Charles Schwab & Co. Inc. ("Schwab"), a dually registered investment advisor and broker dealer. Schwab Intelligent Income™ is an optional feature for clients to receive recurring automated withdrawals from their accounts. Schwab does not guarantee the amount or duration of Schwab Intelligent Income withdrawals nor does it guarantee any specific tax results such as meeting Required Minimum Distributions.
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