The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
By Cyril Tuohy
A new poll by the Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF) finds that the number of Americans seeking financial advice in the areas of medical expense planning during retirement, making retirement savings last and saving for retirement has increased markedly over the past year.
Eric Jones, senior managing director of advisory solutions for TIAA-CREF, one of the nation’s largest retirement funds, said the results weren’t surprising given the huge changes around healthcare reform. Jones also said the poll reflects the aging of Generation X, which is looking for more “big horizon” information, and families’ efforts to recover from the crisis of 2008.
As members of Gen X think about their retirement “they’ve started to get more information and it brings some of those concerns out,” Jones said in an interview with InsuranceNewsNet.
Still, the survey numbers represent big gains over a 12-month period. They reinforce what many advisors already know: the needs of clients around retirement planning run deep, and there’s lots of opportunity for advisors around the preretirement and retirement stages of life.
The second annual TIAA-CREF Financial Advice Survey found that the number of Americans looking for advice about planning for medical expenses in retirement jumped 8 percentage points from last year to 43 percent.
The number of respondents looking to make retirement savings last increased 9 percentage points to 54 percent. The number of respondents looking for advice about saving for retirement jumped by 11 percentage points to 63 percent, the survey found.
KRC Research conducted the survey of 1,000 adults age 18 and older between Aug. 28 and Sept. 2, 2013. It had a margin of error of plus or minus 3.1 percentage points.
TIAA-CREF is one of the largest retirement funds in the nation with more than $523 billion in assets. The fund tracks the habits and needs of its investors closely. TIAA-CREF surveys reveal a strong interest among investors for retirement advice. While this survey only reinforces that finding, the percentage changes in the 12-month period represent big increases.
Jones said the survey also revealed an important shift among respondents from using flesh-and-blood advisors to online tools and services to look for information and to conduct fact finding for “small things,” for which an advisor is no longer needed.
“The job of the advisor is to be aware of what’s available online,” Jones said. “The advisor doesn’t have to be a computer jockey.”
Advisors should reserve the online channel to share information and to communicate with clients, he said. Those advisors who know what’s available online but who use their time offline to structure long-term plans and complex retirement programs will find the “best way to get the capacity lift,” he said.
“That's how you can be more efficient and help more people,” Jones said. “Leave the one-on-one time to prepare and put together a thoughtful plan, and with the big firms they can put this information together.”
As a result of better online tools, pre-retirees and retirees are turning to advisors only when they have complex needs, or when planning has grown into something more than a “do-it-yourself project,” he said.
“People are not looking for the ‘best’ fund,” he said. “They are looking for a plan and for integrated solutions.”
Investors want advisors who can look across a client’s investment portfolio to help adjust investment levers so that they work best to fulfill an investor’s retirement goals.
The survey also found that two-fifths of Americans think good financial advice is too costly, but Jones said that this is a misperception. He said that with so much information available, there’s no reason not to get started, even if it means going to a website for a compound interest projection.
A total of 48 percent of respondents said it was difficult to know which sources of advice to trust, and 46 percent said they needed a trusted place for advice “now more than ever.” Workers in many cases have access to quality advice “right under their nose but they don’t know it,” Jones said.
Jones also said it is important for workers not to confuse the role of the advisor and the role of advice. He said that when financial situations become more complex, then it’s time for an advisor to step in. “The two don’t necessarily go hand in hand,” he said.
However, Jones also said that soliciting advice either for free or through an advisor doesn’t amount to anything if workers don’t take action. He said that as many as 68 percent of respondents who took advice also took action so there’s a correlation between workers who take advice and workers who take action.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.
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