People in their 50s, who are closer to retirement, are more concerned with long-term problems, while their millennial counterparts are more concerned with short-term goals, like how the market is doing currently and which investments they should be considering.

Michael Doshier, global head of retirement marketing for Franklin Templeton Investments, says that the average 27-year-old is not going to care about a Social Security optimization tool, but the average 57-year-old is going to care greatly.

The financial services firm has spent the past three years focusing on how best to reach those ages 50 to 60 with messages tailored to where they are at in their retirement savings journey. Ironically enough, employers may be ignoring their retirement needs over their millennial colleagues.

In the old broker commission days, nobody was looking to service lower balance 401(k) plan participants, he says. Now that many companies have turned to fee-based advisory that is beginning to change.

“The 401(k) system — putting advisers, Washington and regulations aside — puts a lot of focus on getting people in and on track,” Doshier says. Going all the way back to 2006 when the Pension Protection Act was enacted, much of the retirement industry’s focus has been on getting young people, those who typically don’t bother to sign up for retirement savings when they first take a job out of college, to start saving early unless they opt out. But, he says, the same thing isn’t being done for older workers.

“We believe the retirement industry, specifically the 401(k) world, needs to think about it differently,” he says. When plans are set up, typically all employees are treated the same, but older workers have different needs than someone just entering the workforce.

“We are working with Washington and advisory firms and 401(k) providers on a retirement tier that says tools, communications and investment products need to be tailored to that population so they are prepared for the transition],” Doshier adds.

It is having plan sponsors look at the needs within their own companies and how people are behaving today.

“It is about how mature 401(k) participants are trying to use somewhat crude and generic tools and that maybe they do need more custom, tailored solutions,” he says.

The stress of paying for retirement

Franklin Templeton Investments recently conducted a survey of 2,000 American adults over the age of 21 to see how prepared they believe they are for retirement. The Retirement Income Strategies and Expectations survey found that Americans’ biggest concern moving forward is how they are going to pay for medical and pharmaceutical expenses in retirement, followed by paying off debt and funding assisted living care.

And while medical expenses are a major concern, 46% of respondents said they didn’t know how they were going to pay for those expenses in retirement.

“This year’s RISE survey findings really highlight how individualized a person’s retirement savings plan needs to be,” says Doshier. “The differences between generations, even among those of the same gender, show that comprehensive retirement planning requires a holistic view that incorporates demographic differences and short-term risk tolerances as well as long-term goals.”

In its findings, Franklin Templeton divided Generation X women into two categories: younger Gen X women who are between the ages of 38 and 45, and older Gen X women, those between 46 and 53.

Surprisingly, even within this one generation, women have different concerns about the future. Sixty-two percent of younger Gen X women expressed concern about how they would manage their retirement income to meet their retirement expenses, while only 45% of older Gen X women said the same.

And even though they say they are concerned, 67% of Gen X women say they don’t have a strategy to generate income for a retirement that could last more than 30 years. For millennial women, that figure was 55%, and for baby boomer women, that figure was 51%.

A majority of Gen X and millennial women said they would prefer to keep working and retire later if they are unable to retire as planned because of a lack of income.

The survey found that 33% of respondents, across all generations, were worried about running out of money in retirement, with health issues the primary driver influencing that concern.
One disturbing trend is that many people still consider Social Security their main source of retirement income in retirement, followed by their workplace retirement plan.

“It is concerning to us that those are in that order,” Doshier says. “We all know Social Security plays a key role for retirement for many people but nearly half feel that is their primary source and slightly less than half look to their workplace plan.”

Another interesting juxtaposition brought out in the survey was that younger people — when asked about what they would do if they found out closer to retirement they didn’t have enough saved to maintain the lifestyle they want in retirement — assumed they would just work longer.

When current retirees were surveyed about when they retired and why, 37% said they retired before age 65, but not on their own terms. They were either downsized or had to retire early because of health issues.

The desire to work longer vs. the reality, which is out of their control, is something people need to plan for and be aware of, he adds.

A plan of action

People who sit down with an adviser and come up with a written plan for what will happen when they retire are more likely to be confident they will have enough money to pay for all expenses, including medical, in retirement, Doshier says.

And although it is hard to determine your medical, pharmaceutical and long-term care needs in retirement, a good starting place is to look at how much you are spending on those items currently and adapt those prices for inflation moving into the future. When you determine a potential cost of those items in retirement, average those costs out on a per month basis to come up with a final number of what you might need in retirement.

Plan sponsors can help with this by offering retirement income calculators and medical expense calculators to help employees do the math for themselves.

Just having a plan in place can lead to tactical behaviors that will help employees save more for retirement, and consulting with an adviser can help people stay the course on savings, he says.

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