Boom or Bust?

retirement chartSource: Boomer Expectations for Retirement 2016, Insured Retirement Institute

Over the years, we’ve noted considerable evidence that people still working tended to have a much dimmer view of retirement than retirees themselves. When people reached the so-called golden years, they seemed to discover, “Hey, this isn’t so bad after all.” With age, the perception of how much money was needed to be happy appeared to diminish. Or that at least was a tempting inference.

Now the evidence suggests that perceptions are changing, and it may say less about how age softens one’s outlook than changes to retirement itself. Exhibit A: Baby Boomers.

Once among the Woodstock Generation, many Boomers are now retired or well on their way. A third of them are age 65 or older (Boomers were born from 1946 to 1964), and at least one study indicates they don’t share the relatively benign view of retirement as the age cohort ahead of them.

The chart above caught our eye. Courtesy of the Insured Retirement Institute’s (IRI) sixth annual Boomer Expectations for Retirement, it measures the economic satisfaction of Baby Boomers. Even in the years following the Great Recession, Boomers’ economic satisfaction was consistently healthy – better than 3 in 4 were economically satisfied. Then as recovery turned into a healthy economy, guess what happened? Satisfaction fell, by a lot. In 2016 only 43% expressed economic satisfaction. And it didn’t stop there.

Over the same six-year period, those Boomers expressing confidence that they’d have enough to retire went from 37% in 2011 to 24% in 2016 – a drop of more than one-third. Those saying they were doing a good job of preparing financially for retirement was cut in half – plummeting to 22% from 44%. And those saying they’d expect to retire at age 70 or older shot up almost half, from 17% to 26%.

What’s going on here?

First, with many Boomers actually retired, retirement reality is influencing the survey results. Not having a defined-benefit pension plan, for example, may have been a tolerable concept while working, but it’s now an inconvenient fact.

Second, for many, the golden years are an extension of the working years. More people over 65 than ever before are now working, presumably most of them Boomers. And that’s the highest concentration of older workers (one in five) since the pre-Medicare early ’60s.

Third, retirees as a group (non-Boomer as well as Boomer) are beginning to report having misgivings about how well they prepared. Only 28% say they are confident that they did a good job of preparing financially for retirement, versus 42% of people working, and an inversion of what we might have expected in the past.

But here’s a research finding that doesn’t appear to change from year to year: people who consult a financial advisor tend to feel better about their retirement prospects than those who don’t. Whatever the news, it’s always better to be informed, and that’s where¬†advisors can play an increasingly critical role.