New Data from BlackRock Investor Watch™ Survey Finds: INVESTORS LOWERING EXPECTATIONS FOR RETIREMENT LIFESTYLES -- AND INFORMATION GAPS, LACK OF PLANNING STILL POSE RISKS
Many investors are lowering their expectations for their retirement lifestyle -- but even those somewhat diminished plans could be at risk because of key information gaps regarding retirement's realities combined with insufficient focus on planning, according to findings released today from the latest BlackRock (NYSE: BLK) Investor Watch™ survey.
More than four in 10 (42 percent) of non-retired investors say they have lowered their expectations for the kind of lifestyle they will have in retirement. Half of investors say either they have pushed their date back to retire later (15 percent) or are unsure regarding when they will retire (35 percent).
At the same time, many investors continue to misunderstand or underestimate both the financial and demographic realities of retirement, and they also make retirement planning a relatively low priority.
Just 51 percent of non-retired investors agree (and only 10 percent strongly agree) that they know how much to save to cover the lifespan of their full retirement. More than one-third (37 percent) say they are not confident that they will achieve the annual income they need for the time they expect to be in retirement.
About one in three expect to spend less than 15 years in retirement – despite the fact that a healthy couple aged 65 in the U.S. today has a 50 percent chance that at least one of them will live to the age of 92.* Assuming retirement at age 65, that translates into 27 years of retirement.
“It's common for investors to underestimate how much money they will need to cover themselves for their life when retired,” says Frank Porcelli, head of BlackRock's U.S. Retail Business.
“Retirement today is not a single life stage and the new reality is that it could cover a 25-year period or longer during which time an individual's needs, goals and risk tolerance are likely to change.”
The BlackRock survey also suggests that retirement planning does not get all the focus it deserves: When compared with a list of other common pursuits, planning for retirement ranks third among things that investors spent the most time on last year (20 percent), after planning vacations (30 percent) and exercising at the gym (29 percent).
“It's understandable that investors are not paying as much attention to retirement as they ought to, given today's market uncertainty in addition to questions about how much they will need, how long they will live or where to invest,” adds Mr. Porcelli. “But investors don't have to lower expectations for life after retirement. One of the most important steps they can take is to fully educate themselves about the facts of retirement and then ensure that their savings and investment strategies are fully aligned with those needs.”
Addressing the educational need, earlier this month BlackRock launched The BlackRock Retirement Center (www.BlackRock.com/Retirement), which features practical and relevant age-based content and insights to help individuals prepare for retirement in what BlackRock has called a “New World of Investing.”
Stocks Named Most Important Asset Class in Retirement;
Most Investors Are “Standing Still” in Their Portfolios
Meeting retirement goals today requires dynamic asset allocation that reflects the specific goals, risk tolerance and time horizon of each individual investor. The majority of unretired investors rate stocks (81 percent) as the most important retirement investment vehicle followed by bonds (60 percent), cash (57 percent) and annuities (48 percent). But at the same time, four in 10 non-retired investors surveyed by BlackRock agree that they plan to be very “risk averse” in their retirement investing; four in 10 also agree that they don't think there is “a safe way to invest for retirement.”
“It's good to see investors' understanding of the importance of equities in investing for retirement. However, fund flow data tell us that most investors are underweight equities and overweight traditional core bond holdings and cash,” noted Mr. Porcelli. “With interest rates at historical lows and the risk of inflation, investors need to protect and grow their money with investments that span asset classes and geographies.”
Knowledge of Income Investments Remains Spotty
Growing appreciation of the value of secure income in retirement is generating interest in a broader range of asset classes that seek income, given that interest rates available from traditional fixed income investment remain at historic lows. Yet, the BlackRock survey shows that many investors still have a ways to go in understanding the full scope of available income generators.
Almost two thirds – 63 percent – of investors say they are familiar with income generating investments. However, majorities of investors, both nonretired and retired, did not correctly identify several such investments as income generating, including municipal bonds (34 percent identified these as “income generating”), government bonds (29 percent), money market funds (25 percent), and corporate bonds (25 percent).
Investors were able to most often identify dividend paying stocks as “income generating” (61 percent). Over the next six months, about one quarter of investors (24 percent) say that they will increase their portfolio allocation to dividend producing equities, the investment category most likely to attract new money.
“Particularly for those near or in retirement, increased longevity gives investors the ability to ride out market cycles, use a broader range of investments and keep their money working hard for them over time, said Mr. Porcelli. “While it's a good sign that investors are looking at dividend paying investments, those seeking income would benefit from looking across sectors and geographies worldwide.”
Though their knowledge has gaps, investors generally do appreciate that income generation offers benefits at every life stage: 56 percent disagree that these investments are only for retirees and 60 percent agree that they “make me feel safer in the current investing environment.”
“The old ways of investing no longer work – and our poll tells us that investors still need plenty of fundamental support and direction in adjusting to a new world,” said Mr. Porcelli. “The good news is that help is available, and new insights and tools are emerging all the time that offer tangible advantage for investors seeking income, inflation-combating growth, and solid investment return in a low-yield, slow-growth world.”
Note to Editors: The BlackRock “Investor Watch” research is conducted over the Internet with support from research firm Market Strategies International. For this research, conducted in September, 671 investors – 294 retired and 377 nonretired -- were polled between September 26 and October 9, 2012. All of the investors surveyed work with financial advisors, and all had $250K or more in investable assets.
*Source: Annuity 2000 Mortality Table, Society of Actuaries.
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At September 30, 2012, BlackRock's AUM was $3.673 trillion. BlackRock offers products that span the risk spectrum to meet clients' needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares® (exchange traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of September 30, 2012, the firm has approximately 10,400 employees in 29 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com.
Jessica Greaney, 212-810-5498