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Social Security Eligibility Viewed as Key Trigger Point for Retiring

Practice Management

U.S. investors plan to retire when they qualify for Social Security but know that it won’t be enough to live on, according to the results of a global study. 

The findings for the retirement portion of Schroders’ 2020 Global Investor Study reveal that the majority (51%) of U.S. investors said reaching the age to qualify for Social Security would be the reason they retire, while only 4% said hitting their financial target for retirement savings would be the trigger. 

At the same time, 62% of respondents said they know Social Security benefits won’t be enough to live on and 48% are concerned about not having enough income in retirement. On a positive note, that may be why 70% of investors indicate that they are saving at least 10% of their annual income specifically for retirement.

According to Schroders, it may also be why U.S. investors (35%) are more likely to say they would invest disposable income into their retirement savings or another type of investment, such as equities or bonds (27%), rather than spend it on a luxury item purchase (5%).
“It’s very encouraging to see so many investors telling us they are saving at least 10% each year for their retirement, especially when you consider this survey was taken as COVID-19 was spreading in the second quarter,” says Joel Schiffman, Schroders’ Head of Intermediary Distribution, North America. “They recognize that Social Security may not be enough, are concerned about having sufficient income when the time comes, and despite today’s challenges, remain focused on ambitious levels of savings for their retirement.”

Schiffman cautions, however, that investors who want to retire as soon as they qualify for Social Security might think twice before taking their pay-out benefits too early. “If investors start taking their benefits as soon as they qualify for Social Security, they could be leaving money on the table,” he warns. “If they are able to delay by just a few years, they could enjoy higher levels of annual Social Security income for the rest of their lives. Judging by their expectations about spending, they may need it.”

Ongoing Work

Compared to the hours they work today, nearly 4 in 10 (37%) investors surveyed expect their working hours per week will stay the same or increase in retirement.  

A majority (56%) of respondents also said their spending habits in retirement will increase or remain the same as they are today. And for investors in retirement, they report that’s exactly what happened, with 51% saying their spending increased or stayed the same in retirement. As to the hours they work, 31% of retirees said they stayed the same or increased after retiring. 

Risk Aversion?

Surprisingly, 50% of retired investors said they added high-risk investments to their portfolios when the markets hit extreme volatility in February and March due to the pandemic. Another 28% of retirees report that they stayed the course, making no changes to their portfolios, according to the findings. 

The study was conducted in the second quarter of 2020 among over 23,000 investors from 32 locations around the globe. The U.S. portion of the survey included 1,500 respondents who will be investing at least $10,000 in the next 12 months and who have made changes to their investments within the last 10 years.