Few Americans take a holistic view of retirement planning, study finds

While most pre-retirees expect to have more free time to pursue passions during retirement, only a small percentage take a holistic retirement view and include activities such as pastimes in their pre-retirement plans, according to new research by Lincoln Financial.

"Currently, the retirement conversation is more about what pre-retirees need to retire rather than what they want to do once they get there," said Kathy Kavanaugh, CMO, SVP Brand and Individual Solutions, Lincoln Financial Group.

"Our research shows that this conversation needs to evolve," she said, adding that financial advisors have an important role to play in helping to shift the narrative about retirement.

Kavanaugh said more of a focus needs to be placed on holistic retirement planning that includes not just the lead-up to retirement, but also how retirees will budget to spend their free time as well.

"Pastimes need to be more than just a line item in a retirement plan… We really want to help financial professionals change this narrative, encouraging those [who are] 50-plus to start taking financial action now to have enough savings to stay active and do the things they love in the future," she said.

New ways to think about retirement

Lincoln found that 77% of Americans of pre-retirement age think of retirement as a time when they will have more time to pursue long-lost hobbies or favorite pastimes they did not have time for during their peak working years.

Kavanaugh noted that the incoming group of retirees thinks about this phase of life more as a new chapter or a second life rather than a continuation of what they were doing.

"This is exactly why properly budgeting for the activities and extracurriculars they want to pursue is so important," she said.

The recognition that they will have more free time does not seem to directly translate into budgeting plans for many, however. Only 11% of respondents said they have done much planning around the hobbies they expect to pursue.

Lincoln Financial's survey found 87% of pre-retirees in their 50s and 60s intend to spend more time planning for retirement. However, only 30% of the retirees who responded said they felt confident they had done enough planning by the time they retired.

This could suggest that some Americans are only realizing in retirement that they may have failed to adequately account for all of their retirement needs.

"While pre-retirees have the best intentions to plan for pastimes, sometimes life gets in the way," Kavanaugh said. "They may be thinking casually about all the activities they want to do, but they need to take the time to have deeper conversations with their financial advisors about their pastimes and what savings plans they need to put into place now so they can afford them in their non-working years."

Financial advisors urged to think holistically

The results indicate planning for hobbies may be something even financial advisors overlook, as the percentage of pre-retirees who plan for pastimes was still relatively low among those who work with finance professionals.

Of the respondents in their 50s and 60s who said they work with a financial professional, 87% have discussed an investment strategy for their retirement.

However, only a fraction of those respondents said their financial advisor discussed pastime planning with them.

"Currently, many pre-retirees are focused on talking to their advisors about the basic retirement financial commitments such as healthcare, day-to-day finances and mortgage payments," Kavanaugh noted.

Although such items are a necessary part of retirement planning, Lincoln Financial stressed that "talking about pastimes and what retirees are doing in their retirement years needs to start being part of these initial conversations to ensure they can have the retirement they want and deserve."

Only 53% of the pre-retirees who work with a financial professional have discussed budgeting for pastimes. Of that percentage, almost all said they are increasingly concerned about their finances.

Clients whose financial advisors discussed pastime planning with them also reported higher satisfaction, Lincoln found.

"Our research indicates that clients are nearly two times more likely to recommend financial professionals who discuss pastimes in-depth as part of retirement planning conversations," Kavanaugh said.

This suggests that the next wave of retirees in America want to talk about pastime planning but are seeking guidance on "the right way to approach it from a holistic long-term financial perspective."

"It’s important for financial professionals to think holistically about retirement planning — and that should include pastime planning," Kavanaugh added. "Financial professionals can help this group save enough to get to retirement, and then help determine how they are going to spend that money when they get there."

Lincoln Financial is a Fortune 200 insurance, investment management and financial services firm. It has more than 16 million clients in four core areas: annuities, life insurance, group insurance and retirement planning. It has reported billions in balances as of the end of Q3 2023.

 

Rayne Morgan is a content marketing manager with PolicyAdvisor.com and a freelance journalist and copywriter.

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