Study: Boomers Show Fear of Retirement Planning

According to a white paper issued by Financial Engines, retirees and near-retirees feel uncertain about the future, fearful of poverty, and are not confident in their investing abilities. Specifically, "Understanding the Accidental Investor: Baby Boomers on Retirement" reports on interviews with over 300 baby boomers and finds that more than half expressed some form of uncertainty in what the future may bring, nearly half had a fear of poverty in retirement and were distrustful of the motivations or qualifications of financial services and insurance firms, and more than a third said that they did not feel confident or knowledgeable when it came to making important financial decisions.

The most frequently observed behaviors seen among the participants were:

• Paralysis. Regardless of the primary emotion, the most common resulting behavior was ubiquitous across participants: to do nothing. While some were paralyzed with fear and uncertainty, others were prevented from taking action by confusion or not knowing whom to trust.
• Avoidance. When faced with fear of unpleasant or difficult news, some participants said that they preferred not to know how bad the situation was rather than face the facts. Others said that they wanted to avoid spending their 401(k) assets altogether to give them something to fall back on if something unexpected came up.
• Misplaced Trust. Given their distrust of the financial services and insurance industries and lack of confidence in their own financial knowledge, participants often turned to a friend or family member—qualified or not—for retirement advice.
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• Magical Thinking. Many participants resorted to magical thinking, telling themselves that everything would work out in the end, or that they could continue working indefinitely without having to adjust their standard of living.

Sources: Financial Engines Press Release (May 23, 2011); The Baltimore Sun "Fear, distrust prevent older boomers from making retirement decisions" (May 23, 2011)