Mike Morrone, vice president of Nationwide Annuity Business Development, explained to GOBankingRates in an email that for retirees, inflation and interest rates “may be exacerbating the debt they are carrying or causing them to add debt as their spending power declines.”
In fact, 31% of retirees indicated that they don’t think they’ll be as financially secure in their retirements compared to their parents and grandparents.
“That kind of worry can cause investors to make short-sighted decisions based on emotion rather than sound financial principles, which is why it’s so important for them to work with a financial professional who can help keep them focused on their long-term plans,” Morrone noted.
Morrone explained that many retirees envision an ideal retirement as encompassing spending time with family, relaxing, traveling and tackling hobbies that they didn’t have time for prior to stepping away from the workforce.
However, the survey found that some retirees are cutting back on fun to pay their bills. Specifically, 39% are curtailing spending on entertainment, and 34% are reducing the amount they travel.
“Some are finding these are goals that need to be scaled back to make ends meet as everyday expenses are costing more and more,” Morrone said. “Reining in lifestyle spending often means making tough choices, and it can feel like a big sacrifice, but working with an advisor or financial professional can help.”
Morrone added that because people don’t know how long they’ll live post-retirement, it’s tough to estimate the amount they’ll need to carry them through that stage of life.
“That anxiety is likely driving some of the cuts we’re seeing retirees making,” Morrone noted.
Other Options
Guaranteed sources of income can give retirees an idea of how much they can spend on the fun things in life.
“When a retiree can build guaranteed sources of income into their holistic plan, like Social Security, pension benefits, annuity payouts or through other income strategies, it’s easier to predict how much they will have to cover the essential things they need, as well as how much is left for expenses that are nice to have,” Morrone explained. “That may give them more confidence when it comes to spending their savings to enjoy the fun side of retirement.”
According to the survey, financial advisors are “counseling their retired clients on how to generate guaranteed income (23%), prioritizing wants vs. needs (21%) and supplementing income out of necessity (16%).”
“Advisors are providing tailored advice to their retired clients so they can maintain financial stability while still doing the things they enjoy in retirement,” Morrone said. “Many are reinforcing the value of guaranteed income sources, like Social Security, pensions and annuities, which can help clients cover basic living expenses in retirement.”
He added that advisors are also helping clients work through their fixed expenses, such as housing costs and insurance premiums, as well as “helping clients remain calm, nimble and informed in the face of continued economic turbulence.”
Retirement: Not ‘One-Size-Fits-All’
According to Morrone, other survey findings indicated increased recognition that retirees, especially those working alongside financial professionals, understand that retirement planning is not a one-size-fits-all proposition.
“Surprisingly, our survey found some retirees are abandoning traditional retirement techniques used by past generations,” Morrone noted. “For example, 12% are abandoning the 70-80% spending rule (planning for 70-80% of pre-retirement income per year in retirement) and 11% are casting aside the 4% rule (withdrawing 4% of their retirement portfolio each year when retired).
“Instead, they are turning to their financial advisor for the guidance needed to achieve financial security in retirement, being counseled on generating guaranteed income, prioritizing wants versus needs and supplementing income by working in retirement.”
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