BOSTON– (BUSINESS WIRE) — Unexpected health care costs and inflation are top concerns for pre-retirees and retirees, according to a retirement survey recently commissioned by MFS Investment Management® (MFS®). In line with these concerns, pre-retirees expect to work on average a full decade longer than those already in retirement, with nearly half expecting to work early in retirement and one in three working throughout retirement to bolster their savings.

“Due to the many challenges and concerns facing today’s pre-retirees, they are being forced to reassess what retirement means — working longer and working into retirement,” said William Finnegan, Senior Vice President and Director of Global Retail Marketing for MFS. “We see the changing definition of retirement as a tremendous opportunity for financial advisors to engage their clients about retirement income planning.”

Pre-retirees and retirees alike view unexpected health care expenses and inflation in general as top concerns regarding retirement savings, with more pre-retirees viewing each with greater concern than retirees — 70% to 60% for health care expenses and 64% to 50% for inflation, respectively.

“Inflation concerns — be it outliving ones’ savings, unexpected health costs or lost purchasing power — are clearly on the minds of today’s pre-retirees,” said Finnegan. “We recommend advisors and their clients develop a retirement policy statement, just as they would an investment policy, tailored to the needs and risk tolerance of their clients, which can serve as the basis for a plan designed to help a client’s nest egg continue to grow - keeping pace with inflation while generating the income necessary to meet the challenges of the rising costs of everyday expenses.”

Pre-retirees are redefining retirement. According to the survey, existing retirees retired at an average age of 58, with 40% relying on their pension as the primary source of income. Today’s pre-retirees are approaching retirement differently, fully expecting to work on average a full ten years (age 68) later than current retirees, with roughly the same number relying on pensions (23%) as on workplace retirement plans (25%). While approximately one-quarter (24%) of today’s retirees continue to work or worked early in retirement, nearly half (47%) of pre-retirees expect to continue to work in the early phase of retirement. Of those surveyed, 32% of pre-retirees plan to work throughout their entire retirement as well. That figure drops to one in ten for retirees.

“Baby boomers are going to redefine retirement, and financial advisors need to deepen their involvement in the planning process,” Finnegan added. “With typically low savings rates for the average American and greater potential longevity, combined with the above-cited concerns over inflation, pre-retirees will be living and working longer than previous generations. We are challenged as an industry to develop investment products and strategies to help clients manage their financial picture in a redefined retirement phase.”

Nearly half (46%) of pre-retirees and more than one-quarter (28%) of retirees surveyed reported that neither they nor their advisor have developed a formal retirement income plan, representing a tremendous opportunity for financial advisors. Survey results show that once a conversation about retirement income planning took place, both pre-retirees and retirees took action:

• Half changed investment allocations (53% pre-retirees, 52% retirees);
• One-third (32%) of pre-retirees increased their savings;
• About three in ten consolidated assets to one advisor (27% pre-retirees, 30% retirees).

“Once pre-retirees have engaged an advisor regarding retirement income, many take action,” concluded Finnegan. “In the coming decades, today’s pre-retirees will redefine what it means to be ‘retired’ and extending the planning conversation well into their golden years may benefit them and provide market opportunities for advisors and planners.”

The MFS investor survey was conducted in September 2007, with responses from 204 pre-retirees and 229 retirees, between the age of 55 and 75, who were either working full-time or retired, used a paid financial advisor and reported at least $100,000 in investable assets (excluding retirement and real estate). Similarly, the MFS advisor survey included responses from 206 financial advisors who identified themselves as financial advisors, brokers, investment managers, certified financial planner or wealth managers in September and October 2007. Richard Day Research, Inc., an independent research firm not affiliated with MFS, conducted both surveys and did not identify MFS as the study sponsor.
MFS manages $200 billion in assets on behalf of more than 5 million individual and institutional investors worldwide as of December 31, 2007. The company traces its origins to 1924 and the creation of America’s first mutual fund.