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There are plenty of demographic trends advisors should stay abreast of, but one that’s particularly important is the fact that 2024 represents the year in which more baby boomers will turn 65 years old than any prior year.
That represents a demographic and retirement tsunami and those birthdays are arriving against the backdrop of high inflation, which stoked the highest interest rates in two decades. Not surprisingly, those are big concerns for retirees and pre-retirees. Speaking of pre-retirees, a group loosely defined as those in their mid-50s, many believe 65 is no longer the “gold standard” in terms of exiting the workforce, implying they plan to work beyond that age.
Inflation, which created lost purchasing power and one of the worst years on record for bonds in 2022, is a big reason why many pre-retirees are delaying retirement. Confirming that people in the pre-retiree camp need advisors, two-thirds of them believe they’re in for retirement headwinds that their older counterparts didn’t deal with.
Data Points for Advisors to Chew On
A recent Advisory Authority survey in partnership with the Nationwide Retirement Institute underscores just how pensive some pre-retirees are about mounting retirement challenges.
“Some eye-opening results from our survey show how impactful economic concerns are among pre-retiree investors. More than half (57%) said inflation poses the biggest challenge to their retirement plans in the next 12 months. Moreover, 42% agreed that managing day-to-day expenses is getting more difficult due to the rising cost of living,” notes Nationwide.
Advisors shouldn’t be in the business of speculating as to when inflation will decline to the Fed’s desired 2% ranges. It’s a fool’s errand and could lead to disappointment among clients. However, advisors can be proactive in assisting clients with budgeting and managing expenses.
It’s likely something they’ll appreciate because data confirm inflation and lost purchasing power are prompting pre-retirees to alter plans, usually in negative fashion.
“These economic pressures are forcing pre-retiree investors to change their behaviors and outlooks. For example, twice as many pre-retirees say their plans have changed over the last 12 months to delaying retirement (22%) compared to retiring early (11%). And nearly four in ten pre-retirees (41%) said they’d continue to work in some capacity in order to supplement their retirement income out of necessity if they retired in the next 12 months,” adds Nationwide.
Amid Economic Challenges, Advisors Increasingly Important
If there is a silver lining to the skittishness felt by so many pre-retirees, it’s that they’re not taking this occasion to go it alone. Actually, they’re increasingly relying on advisors.
“Pre-retirees see value in the relationships they have with financial professionals and want to work more closely with them to help improve their retirement preparedness. For example, 70% of pre-retiree investors feel their financial professional understands their needs, compared to 62% of all investors,” observes Nationwide.
That implies clients believe there’s a light at the end of the tunnel and they want to work with advisors to get there.
Related: Retirement ‘Magic Number’ Surges, but Advisors Can Help