Retirement Fears Distress Even the Most Confident Investors

Even those of us who feel they are adequately prepared for retirement have lingering fears regarding their so-called golden years.

Although 88% of affluent investors in a Legg Mason survey reported being confident they will have enough money to live the lifestyle they want in retirement, they worry that a number of issues could sidetrack their retirement success.

The top concern among the 500 affluent investors in the survey was “having a catastrophic event that uses up my retirement funds.”

"We fear the unpredictable, the catastrophic event that can decimate retirement savings," Matthew Schiffman managing director and head of global marketing at Legg Mason Global Asset Management, said in a statement. "As a result, we encourage financial advisors and investors to take a realistic approach when planning for retirement. We call it 'realtirement' and it includes trying to anticipate the unpredictable. For instance, have you planned for your long-term living situation? What if you suddenly need assisted living or even greater care? Are you prepared for that event? We all need to be."

The second concern, which has been a top worry for a long time, is the potential to outlive retirement funds, followed by the government not fulfilling obligations, not having enough saved for retirement, and the low-interest rate environment.

A separate survey from the National Endowment for Financial Education (NEFE), found that retirement savings are such a large concern, it is far more important than the American Dream of owning a home. According to respondents, 50% say it is important for them to have enough money for retirement, while just 13% said homeownership was their most important goal.

“People are more in tune with the importance of saving for their retirement years,” says Ted Beck, president and CEO of NEFE. “Economic recovery is inching forward yet many individuals and families still are experiencing difficulty getting back on track. Americans seem to be finding reassurance in more long-term financial-security-based values rather than material values.”

Even millennials are more concerned with retirement than homeownership. Nearly 30% of those ages 18 to 34 say they are primarily focused on retirement saving, compared to just 21% thinking about owning a house. However, just 3 years homeownership topped the list of financial goals, according to the same survey.

When it comes to investing, being able to provide for their own retirement was the top priority of investors, followed by maintaining their current lifestyle later in life; protecting their wealth; growing their wealth; and generating income for living expenses.

Investors preparing for retirement admit that leaving a legacy is not among their priorities as their least important concerns include: providing for family after they are gone; protecting wealth for children; and providing for a family member’s need.

The affluent investors from Legg Mason’s survey had some advice for the worried millennials of the NEFE survey. According to 82% of Legg Mason’s respondents between the ages of 55 and 64, future generations will likely face a more difficult environment than investors face now. As such the top 5 pieces of advice they offered were:

1. Start investing early

2. Make sure you understand what you invest in

3. Avoid short-term decisions based on emotions

4. Make a plan and stand by it over time

5. Employ a professional advisor

However, they don’t suggest being cautious investors. According to an earlier study from UBS Wealth Management, millennials are the most fiscally conservative generation since the Great Depression and tend to be savers and more risk averse in their investments.

A third of millennials consider their risk tolerance conservative or somewhat conservative, but UBS reports that the generation’s actual asset allocation suggests it is actually extremely conservative. While being cautious seems the safe move, underinvesting in risky assets could mean this generation finds their money is unable to keep up with inflation.

"Investors over 50 years old today have been through numerous market cycles so their insights and decisions are well tested," Schiffman added. "This sage advice may be suited for the next generation, but even seasoned investors can learn a thing or two from items on the list like to avoid short-term decisions based on emotions, and make and stick with a plan."