Husbands and Wives Approaching Retirement Have Different Understanding of Their Financial Plans
BOSTON, MA, April 17, 2007 -- Fidelity Investments today announced the results of new research that tested whether married couples heading toward retirement have the same level of knowledge about their finances and agree on basic retirement planning issues.
The results showed that although couples generally agree on which retirement products they own, they often differ on their plans and expectations for retirement. In fact, Fidelity found that in more than 30 percent of couples, husbands and wives gave completely different answers when asked what age they will retire, their expected lifestyle in retirement and whether they intend to continue working in retirement. Fidelity conducted the research with 500 married couples, comprising Baby Boomers and older pre-retirees, born between the years of 1937 and 1964.
When asked which income sources they would rely on most in retirement, most couples agreed that workplace savings plans, pensions and Social Security would top the list, but few husbands and wives (39 percent) agreed upon which potential source would be their primary source of income.
Many couples (58 percent) failed to give matching answers when asked who their spouse would turn to for financial guidance in the event of their death. Adding to the confusion, one in five (22 percent) couples could not even agree on whether they use the services of a financial advisor to help them plan for retirement.
"It was surprising to us that given how close many of these couples are to retirement, they had yet to sit down to discuss and agree on basic retirement goals, aspirations and income sources with each other," said Steven P. Akin, president of Fidelity Personal Investments. "That's why creating a retirement plan is so critical. It helps husbands and wives address those tough, but basic planning questions that can dramatically alter a couple's retirement savings strategy."
Product Ownership Doesn't Always Mean Product Knowledge
Fidelity tested each couple's general knowledge of the types of retirement investment products they own and whether husbands and wives equally understand the specific details of those products. A majority of couples showed agreement on questions about their combined workplace plans, bank accounts and IRAs. However, annuities, brokerage accounts and pensions proved to be more problematic. For example, among couples who own annuities, only about half of both husbands and wives reported knowing when they could draw income from their annuities. Additionally, less than one-quarter of couples understood the actual dollar amount that would be generated by their annuity once in retirement.
In the area of pensions, nearly 70 percent of both husbands and wives knew at what age they can draw from their own respective pensions. However, when asked when they think they can draw from their spouse's pension, 60 percent of men indicated they knew when and only 37 percent of women reported knowing when they can draw income.
Nearly all couples (90 percent) fully agreed on their ownership of life insurance policies. However, two in five couples did not agree on the coverage amount within those policies. Even when asked about Social Security, couples showed confusion around benefits expectations, with women being more familiar than men on how much income a surviving spouse could expect to receive when the first spouse passes away.
"It's important in preparing for retirement to fully understand the specifics around your guaranteed income sources, and what this study shows is that there's still significant confusion around pension, Social Security and annuity benefits," said Jon J. Skillman, president of Fidelity Investments Life Insurance Company. "We need to get every couple to a point at which understanding the benefits and details of their annuity is as easy as understanding their 401k or IRA."
Greater Agreement, But Lack of Planning for Retirement Concerns
When asked what unexpected financial issues concern them most in regard to retirement, two-thirds of couples (70 percent) agreed that health care is a concern, and close to half (47 percent) agreed that it is the biggest concern. Other concerns cited were inflation cutting into savings and reduced Social Security benefits. One-fifth (23 percent) of couples agreed they have yet to take action either in planning or purchasing products such as long-term care insurance to compensate for these concerns.
Partnership Leads to Increased Optimism and Preparedness
Most couples did not cite high levels of partnership in financial decision-making, as only 23 percent reported joint involvement with their finances. While these jointly involved couples are generally older, they are also more prepared for the unexpected in retirement and more optimistic about their expected lifestyle once in retirement. Conversely, among the couples who do not partner in financial decision-making, nearly two-thirds (62 percent) are unprepared in terms of planning for the unexpected in retirement, lacking important elements such as life and long-term care insurance and established wills and estate plans.
About Fidelity's Couples Research
The Fidelity Investments Couples Retirement Research Study was conducted between February and March 2007 by Richard Day Research, an independent research firm, with a national sample of 502 couples who meet the following criteria: Married couples with household income of at least $75k or investable assets of $100k or more; age 43 to 70; and plan to retire from their full time profession.
About Fidelity Investment Life Insurance Services Company
Established in 1987, Fidelity Investments Life Insurance Company (FILI) and for NY residents, Empire Fidelity Investments Life Insurance CompanyŽ, NY, NY, develop and market their own insurance products, in addition to distributing those of other well-known insurers. These products are made available to investors through FILI's internal distribution arm, Fidelity Insurance Agency, Inc. (FIA). FILI maintains an AA (very strong, 2nd highest) rating from S&P and an A+ (superior, 2nd highest) rating from A.M. Best.
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