How Planning Can Lead to a Happy Retirement

The “2014 Planning and Progress Study,” an annual research project commissioned by Northwestern Mutual, finds 70% of highly disciplined planners feel very financially secure, compared with 51% of disciplined planners, 34% of informal planners and 17% of nonplanners. The study also shows highly disciplined planners who are retired are much more likely than nonplanners to say they are happy in retirement (91% vs. 63%).

“Happiness can’t be bought, but it can be planned for,” says Greg Oberland, Northwestern Mutual executive vice president, based in Milwaukee, Wisconsin. “The links between discipline, financial security and happiness are quite distinct. There’s some powerful evidence to suggest that the small steps you take today can make a real difference tomorrow.”

Oberland notes that the overall level of discipline that Americans bring to their finances remains low. Specifically, the results of the study show:

• Less than one in five U.S. adults (18%) consider themselves a highly disciplined financial planner (i.e., they know their exact goals, have developed specific plans to meet them, and rarely deviate from those plans);
• One-third (36%) consider themselves disciplined (i.e., they know their exact goals and have developed specific plans to meet them, but those plans can deviate at times because they do not always stay on top of them); and
• Nearly half of adults (46%) are either informal planners or nonplanners who do not do any planning at all.

Additionally, 60% of all respondents in the study believe their financial planning could use improvement; and the number one roadblock, cited by more than one in four (27%), is lack of time.

The Most Financially Disciplined

The study finds younger adults (ages 18 to 39) and more senior adults (age 60 and older) have something very important in common—they represent the most disciplined financial planners in the United States. Meanwhile, adults who fall between ages 40 and 59 are the most financially unprepared and most likely to identify themselves as informal or nonplanners.

More specifically, 59% of younger adults and 54% of more senior adults identify themselves as disciplined financial planners, while less than half of adults ages 40 to 50 believe they are disciplined. Also, more than half (51%) of adults ages 40 to 59 identify themselves as informal or nonplanners, whereas that number drops to 41% in younger adults and 46% in senior adults.

Young Boomers Need More Financial Discipline

The study finds 60% of the youngest Baby Boomers (ages 50 to 59) acknowledge the need to improve their savings and investing discipline, but have the least appetite for doing so. Oberland says for 25% of Americans in this age group, the biggest barrier is simply a lack of interest (25%), as well as a lack of money (13%).

Additionally, these young Boomers:

• Do not use a financial adviser (70%);
• Take an informal approach to financial planning (40%); and
• Would not call themselves planners at all (12%), the highest percentage of any age bracket surveyed.

The study was conducted by Harris Poll, on behalf of Northwestern Mutual, and included 2,092 American adults ages 18 or older who participated in an online survey between January 21 and February 5.

More information about the study can be found here.