Q AICPA CPA Personal Financial Planning Trends Survey

Transcription

1 Q AICPA CPA Personal Financial Planning Trends Survey Executive Summary The focus of the Q PFP Trend Survey is on the general retirement planning issues that CPA financial planners and their clients face. CPA financial planners ensure that retirement planning decisions are made in the context of the client s entire financial situation including their tax planning, estate plan, investments and risk management needs. The planner s retirement planning insights highlight client concerns about retirement income, dealing with unexpected events, and addressing lifestyle spending decisions. This online survey was administered February 3-26, 2015 to members of the AICPA Personal Financial Planning Section, inclusive of CPA/PFS credential holders, and resulted in 548 completed survey responses by CPAs. Top client retirement planning concerns CPA financial planners, many of whom work with high-net worth individuals, indicated that the top retirement concern for their clients is running out of money (79% ranked it in the top 3, with 57% identifying it as the #1 concern). The second most prevalent concern is healthcare costs, followed by deciding how much to withdraw from assets. Longevity, Social Security decisions, and diminished capacity and dementia issues rounded out the top 6 client concerns. See Chart 1 for complete responses. Chart 1: Overall Retirement Planning Concerns for Clients #1 Concern #2 Concern #3 Concern A "top 3" concern for: Running out of money Healthcare costs Asset withdrawal decisions Longevity concerns Social Secutiy decisions Dealing with diminished capacity and dementia issues Concerns over what they will do in retirement Afraid to leave the workforce Housing choices as they age Taking care of an aging relative Prioritizing education funding over retirement Worries over heirs fighting about estate 14% 6% 12% 8% 6% 6% 57% 27% 22% 14% 56% 9% 79% % of CPA's that identified this as a concern of thier clients 1

2 Longevity and outliving your money As illustrated in Chart 2, of respondents said clients have raised the concern of outliving their money. Survey respondents, however, also indicated that they had similar concerns for only 37% of their clients, indicating that some clients are actually better prepared for retirement than they may perceive and the CPA financial planner s involvement and knowledge of the client s goals and plan is an opportunity to help reduce client stress about outliving their money. Chart 2: Client Concerns About Outliving Money % of clients that CPA financial planners are concerned about running out of money 37% % of clients that have raised a concern about running out of money 4 6 The three items causing the most client stress regarding outliving their money are healthcare costs (76%), market fluctuations (62%), and lifestyle expenses (52%). 47% of the respondents also placed unexpected costs in their choice of the top three factors. See Chart 3 for complete responses. Chart 3: Factors Causing Client Stress about Running out of Money A "top 3" concern for: 76% #1 Factor #2 Factor #3 Factor % of CPA's Identifying Stress Factors % 31% 27% Healthcare costs 62% 17% Market fluctuations 52% 14% Lifestyle expenses 46% 9% 8% 8% 7% Unexpected costs 24% Being a financial burden Desire to leave inheritance 7% 12% Financial support of children 2

3 Unexpected events impacting retirement Long-term health care is the largest uncertainty with an average of 42% of CPA financial planners clients currently experiencing the issue (see Chart 4) and 59% of the respondents reporting increased client impact over the last five years (see Chart 5). 31% of the respondents cited it as the highest stress factor for clients concerned about outliving their money (see Chart 3). Other issues trending to have a larger impact on retirement include taking care of aging relatives and dealing with diminished capacity and dementia with and 26%, respectively, of respondents clients currently affected. While about half of the respondents have not seen an increase in these two concerns over the last five years, less than have seen a decrease, indicating that CPAs should continue to monitor and discuss these concerns with their clients. Job loss and adult children returning home each affect only of the respondents clients and about half of the respondents indicated no change from five years ago in these areas. Chart 4: Unexpected Events That Impact Retirement Planning Healthcare concerns Other (most freq: income/market changes) Care for aging relatives Diminished capacity/dimentia Divorce Job loss Adult child returning home 26% 42% % of Clients That Experience These Unexpected Events Chart 5: Five Year Change in Impact of Unexpected Events Less Often About the Same More Often % of Respondent's Clients Impacted % 4 59% Healthcare concerns 7% 43% Care for aging relatives 4% 57% 39% Diminished capacity/dimentia 23% 49% 28% Adult child returning home 52% Job loss 7 Divorce 3

4 Addressing diminished capacity during retirement Addressing diminished capacity during retirement was identified by of the respondents as at least one of their top three client retirement planning issues (see Chart 1). Respondents reported this issue currently affects 26% of their clients (see Chart 4) and has a greater impact on client planning than it did 5 years ago (see Chart 5). While 5 of respondents say their clients are discussing the issue but unsure of what to do in this area, 34% said clients are either ignoring the issues or just reacting when it arises. See Chart 6 for complete responses. Chart 6: Client Attitudes Toward the Potential of Diminished Capacity During Retirement Planning Ignoring the issue Reacting to it when and if it happens Discussing but not sure what to do 5 Taking proactive steps now to prepare 4 6 % of Respondents Divorce and gender retirement impact In general, while divorce can have an impact, it is not a widespread concern for clients in retirement planning, according to the survey respondents. About 7 of the respondents said that the frequency of divorce as an unexpected event for retirement has not changed in five years (see Chart 5), with about of their client s retirement planning impacted by divorce (see Chart 4). Chart 7 shows that for divorced clients, gender generally does not seem to distinguish client savings and preparedness for retirement. However, of the respondents indicated that their divorced female clients are likely to be emotionally devastated and, as a result, not discussing retirement planning issues versus only 8% for their male clients. Another survey response which revealed a gender gap indicated that of respondents indicated men are already secure for retirement when coming out of a divorce versus only for women. When divorced clients do focus on retirement planning, respondents shown in Chart 8 felt their female clients were more likely to actively seek out financial advice (64%), change current spending patterns (47%), remarry for financial security (69%), and seek out a job (). Conversely their male clients would be more likely to remarry for companionship (52%). Other areas did not have a clear gender differentiation. 4

5 Chart 7: Client Preparedness for Retirement Planning After a Divorce, by Gender Men Women % of Respondents 2 1 8% Emotionally devasted and not discussing savings 28% 26% 26% 24% 2 26% Discussing but generally taking no action Started but a low priority Making good progress Already secure for retirement Chart 8: Divorced Client Gender Differences Regarding Retirement Planning Actions Both About the Same Women Men Actively seek out financial advice 31% 64% Change current spending patterns and habits 12% 41% 47% Increase savings toward retirement 3 44% Remarry for companionship 36% 52% Remarry for financial security 2% 69% Review wills and other legal documents 16% 24% 6 Seek out a job 12% 38% Utilize employer benefits more wisely 16% 66% % of Respondents 5

6 Annuities and Social Security Specific sources of a stable income stream during retirement that address longevity concerns can include annuities and Social Security benefits. As shown in Chart 9, 66% of the respondents said that up to 2 of their clients utilize annuities as an investment or income vehicle for longevity, while said that none of their clients use annuities. Chart 9: Client Use of Annuities in Retirement Planning % of Clients Using Annuties % 3% 66% % of Respondents with Clients Using Annuties Regarding Social Security, 63% of respondents said that or less of their clients had discussed benefit maximization strategies with them. About 2 of respondents retired clients had taken reduced Social Security benefits at age 62 and only had deferred until age 70, indicating an opportunity for CPAs to discuss these strategies with their clients. See Charts 10 and 11. None Chart 10: Clients Discussing Social Security Benefit Maximizaton Strategies % of Clients 4% 16% 24% 3 4 % of Respondents with Clients Discussing Maximizing Social Security Benefits 6 4 % of Clients Chart 11: Clients Start Dates for Social Security Benefits 2 Age 62 54% Full Retirement Age Age 70 6

7 About the AICPA s PFP Division The AICPA s Personal Financial Planning (PFP) Section is the premier provider of information, tools, advocacy, and guidance for CPAs who specialize in providing estate, tax, retirement, risk management, and investment planning advice to individuals, families and business owners. The primary objective of the PFP Section is to support its members by providing resources that enable them to perform valuable PFP services in the highest professional manner. CPA financial planners are uniquely able to integrate their extensive knowledge of tax and business planning with all areas of personal financial planning to provide objective and comprehensive guidance for their clients. The AICPA offers the Personal Financial Specialist (PFS) credential exclusively to CPAs who have demonstrated their expertise in personal financial planning through testing, experience and learning, enabling CPAs to gain competence and confidence in PFP disciplines. The team members of the AICPA PFP Division can be reached at financialplanning@aicpa.org. 7