Reaching Financial Goal Not Main Driver of Decision to Retire

October 17, 2011 ( – A new Hearts & Wallets study finds the decision to retire in five years is driven by a Pre-Retirement Checklist.

At the top of the list is feeling “done” (satisfied or frustrated) with work. Children reaching financial independence, having one’s “financial house” in order, knowing relatives died at a young age, and seeing friends retire are all precursors for this transition. Few Americans cite reaching a financial goal or a “go-ahead” from an adviser.  

According to a press release, 16% of those 55 to 64 consider themselves “Pre-Retirees,” primary household breadwinners within five years of retirement. The Pre-Retiree lifestage group is comprised of diverse age groups. Slightly more than half of Pre-Retirees are 55 to 64.  

The analysis shows total U.S. household investable assets at $30.2 trillion at year-end 2010 with retirement assets at $10.7 trillion and taxable assets at $19.5 trillion. Taxable assets climbed steadily since 2004, from $12.9 to $19.5 trillion. Retirement assets recovered from a bad stumble down to $8.1 trillion in the crash of 2008, rising to slightly surpass their 2007 peak of $10.5 trillion.  

Pre- and Post-Retirees (and Fully Employed Seniors) control one out of every two investable dollars (more than $15 trillion). Emerging/Early, Mid- and Late-Career investors control the other half of the $30.2 trillion and represent the long-term future of saving and investing.  

Investors moving down in assets have changing views of financial advisers and firms based on their fluctuating fortunes.  

“For some households, the drop in asset segment was because of personal investment choices, and a segment of those are now seeking the help of a professional financial advisor, a behavioral segment identified by Hearts & Wallets as ‘Upshifters,’” said Laura Varas, Hearts & Wallets Principal, in a press release. “Other households suffered the decline while having professional financial advice, and some, ‘Downshifters,’ now question the value of that advice and whether they might make better choices themselves. We were already seeing investors want to better understand the value of what they are paying for. This disruption is accelerating that trend.” 

Affluent Asset Segments Change in Numbers  

A new Hearts & Wallets study finds the $2 to $5 million and the $250,000 to $500,000 asset segments were particularly hard hit by the recession. The $250,000 to $500,000 asset segment now totals 6.4 million households, down about 25% from 8 million in 2009. This segment is concentrated in the 45 to 54 and 55 to 64 age groups as in 2009. This group controls $2.5 trillion in assets, down from $2.9 trillion with the decline occurring in retirement accounts and managed investments.  

The $1 to $2 million and $100,000 to $250,000 segments grew, as they received households that shifted down into these asset segments.  

The poorest Americans, the median household with very little to lose, lost nothing. The median household in the 25th to 49th wealth percentiles lost $10,700. The 50th to 75th percentiles (corresponding to the $50,000 to $100,000 wealth segment), lost $40,000. For the 75th to 89th percentiles (from above $100,000 to just under $500,000), the median household lost $134,000. The worst one-quarter of households lost $261,000, but the best one-quarter actually improved relative to peers.  

“The shifting of assets has been dramatic, illustrating the challenge in offering asset-based pricing services to investors,” said Chris Brown, a Hearts & Wallets Principal, in a press release. “How much money someone has at a point in time is not a particularly insightful descriptor of their interests or concerns. The financial services industry needs to understand this when developing investor servicing models.”  

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