Most new retirees are confident that they can meet their basic needs, but less than half are confident that they can afford the retirement lifestyle they want, according to a new study.
Ameriprise released a report on retirement on Tuesday, revealing that most retirees were confident financially and emotionally though a significant minority had cause for concern. The firm surveyed about 1,000 American adults between the ages of 60 and 73 who had retired in the previous five years and had at least $100,000 in investable assets.
According to survey data, 75% of retired baby boomers expressed confidence in their ability to cover their basic needs while in retirement.
"That was a little bit of a surprise. I think largely as a result, this group is overwhelmingly happy in retirement," says Marcy Keckler, vice president of financial advice strategy at Ameriprise Financial.
However, at the same time, only 46% said that they were confident that they could afford their desired retirement lifestyle.
While about half of retirees said that they had accurately estimated their savings needs, about a quarter said that they had underestimated their needs. Many boomers could make adjustments if needed; 51% said they could downscale aspects of their lifestyle if required.
About 40% of boomers relied on a financial advisor to help make a decision as to when to retire. In contrast, nearly half relied on social security's website and resources.
For those who worked with a financial advisor, 87% said that they used an advisor to manage their investment portfolio. Slightly more than half said their advisor helped plan the right withdrawal rate from their retirement accounts, while less than a third said they used their advisor to stay current with changes in tax laws.
Emotion plays a key role in the decision-making process. Nearly two-thirds said they felt stressed about making the decision to retire.
"I think there is a lesson for financial advisors to talk to clients not just about the finances of retirement but the emotional aspects too," says Keckler.
Not surprisingly, couples often plan together: 80% of respondents said that they had discussed their decision to retire with their spouse or partner.
After having made the transition to retirement, baby boomers said three challenges stood out: losing connections with colleagues, getting used to a different routine and finding a new purpose or hobby.
"I think it's important for an advisor to talk with their client about what they would do in retirement," says Keckler. "What would an ideal day in retirement look like? What would you do? Who would want to talk to?"