A new survey reveals that many investors are once again taking for granted the old assumptions they had about their retirement savings.
Despite the most tumultuous year for investors since the Great Depression, Americans appear unfazed and continue to have high hopes for retirement, according to research by Allianz Global Investors. But they may need a more realistic approach to retirement planning and investing if their expectations are to be met.
The survey found that 78 percent of investors expect their standard of living in retirement to be the same or better than it is now. Eighty percent believe they have planned for the future and are confident they will have a secure retirement and once again are depending on strong stock returns to fund these retirement dreams.
Nearly half of investors (48 percent) continue to rely on equities as the foundation of their retirement portfolios, and 74 percent say it is likely the stock market "will bounce back and restore" any portfolio losses. Overall, respondents believe a 9 percent annual mean return is a reasonable expectation for retirement planning
Investors are also counting on a "healthy" retirement despite seeing the effects of old age on others. The survey found that 77 percent of all respondents expect to have "better than average health" throughout retirement, and 61 percent have never accounted for health care costs in their retirement planning.
The survey was conducted online by Harris Interactive within the United States between July 27 and Aug. 10, 2009, among a nationwide cross section of 1,013 pre-retired household financial decision makers aged 30 or older with at least $250,000 in investable assets.
Investors admit they dont know enough and are looking to advisors for help. Seventy-two percent want to know more about generating sustainable retirement income. More than half (55 percent) agree that its more important than ever to work with a financial advisor.
A key finding of the survey is that as stocks have regained their vigor, so has typical American optimism. Although investors say they lost an average 30 percent of their retirement savings at the bottom, they are nonetheless overwhelmingly positive about the outlook for their retirements. A large majority (71 percent) of those surveyed believe the situation will turn around and they will have a great retirement. And nearly 80 percent say they are at least somewhat confident theyll have the money they need when they want to retire. Furthermore, more than 60 percent believe that the market dislocation is a temporary downturn and things will eventually go back to normal. This refusal to learn from the experience may lead to problems down the line.
Despite this refreshing optimism, tremendous damage has been done and Americans now have a lot less accumulated for retirement than they did even a few short years ago, said Allianz Global Investors Distributors CEO Brian Gaffney. Our survey reveals a need for all of us to honestly reassess our vision of retirement and to develop realistic and sustainable retirement savings models. Its important that we take to heart the lessons learned during this financial crisis and make small changes now to improve our likelihood for a secure retirement in the future.
