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2019 Wells Fargo Retirement Study RevealPreparing for a 21st century retirement

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Preparing for a 21st century retirement

Retirement is the triathlon of financial planning, testing the endurance of savers over decades.

It takes perseverance and conviction. It calls for building strengths and developing skills. It means staying focused and knowing when to course correct.

Findings from our 2019 retirement research point to a need for better preparation — to work smarter, not harder. Today’s retirees are happier than workers, despite some having an unmanageable amount of debt and a high level of financial stress. Even high-net-worth investors are worried about running out of money. Our research also reveals an opportunity for financial advisors and retirement plan sponsors to coach savers toward better outcomes. Providing the right tools, information, and guidance will help current and future retirees meet retirement goals — making it to the finish line on their terms.

Navigating 21st century

challenges

Adopting a planning

mindset

Course correcting as conditions

change

Navigating 21st century challenges

Going against the tide

Retirement used to be straightforward. Workers accumulated pension benefits until they turned 65 and became retirees. The shift to defined contribution plans plus longer life expectancy means uncertainty is now part of retirement planning.

New and soon-to-be retirees are at the forefront of this shift and are most vulnerable to running out of savings. The costs and risks of retirement have soared, but retirement expectations are mostly unchanged.

Even current retirees have financial stress, despite having benefited from investment tailwinds, Social Security solvency, and lower longevity risk.

Workers of all ages need to take action now — to increase the likelihood that they glide through retirement, not just tread water.

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Primary source for paying monthly retirement expenses

Retiree Baby Boomer Gen X Millennial Gen Z

401(k) and/or IRA (%) 5 22 41 45 44Social Security (%) 64 41 21 13 16Pension plan (%) 22 19 16 12 4

Workers

Retirees

59%

44%

Workers

Retirees

79%

79%29 (avg) 40 (avg)Workers Retirees

Workers

Retirees

46%

31%

Set the pace

We can improve the outlook for future retirees by focusing on key success factors within our control.

How much we saveWhen we start to save How we invest

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Adopting a planning mindset

Map the best route

A planning mindset provides a road map that can help strengthen a person’s financial future. It adds new meaning to the belief that “planning is everything.”

Our research shows this is a powerful predictor of positive financial outcomes and personal wellness, we can strive to get more people into the planning mindset. All workers should be able to enjoy the retirement that they want and deserve — without worrying about the risk of running out of money.

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Four components of a planning mindset

More influential 1. “I am able to work diligently toward a long-term goal.”

2. “ In the last six months, I have set and achieved a goal or setof goals to support my financial life.”

3. “ I prefer saving for retirement now to ensure I have a betterlife in retirement.”

Less influential 4. “ It makes me feel better to have my finances planned outin the next 1–2 years.”

35%of workers have the planning mindset

Workers with the planning mindset are more likely to feel they can positively affect these areas.

30%of workers feel

personal control in all four aspects

Personal debt

Financial life

Investment performance

CareerWorkers with the planning mindset

nearly

2xMore satisfied

with their overall financial life

nearly

2xMore confident they

will have enough saved for retirement

2.5xHave a strong sense of personal control

over their current debt situation

5xMore likely to have a plan for handling

the unexpected

5xMore likely to have a long-term plan with overarching goals

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Course correcting as conditions change

Run your own race

Uncertainty means that circumstances can change before and during retirement, and people will need to adapt. Projected retirement income may be lower than expected — actual life span may be longer. The last mile could end up being the last 10.

Planning for retirement is a complex puzzle that calls for a multifaceted and individualized solution. But generations have shared experiences that offer clues to future needs.

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“I have an unmanageable amount of debt.”

31%25%26%

13%

Boomers

Gen X

Millennials

Gen Z

“I have more faith in my personal retirement savings plan than in Social Security.”

Workers 79%

Retirees 55%

“I have no idea what I would do without Social Security in retirement if it wasn’t there.”

Retirees 71%

Boomers 57%

Gen X 66%

Millennials 64%

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Top three most important items when planning for retirement:

Making savings last through retirement

Health care expenses

Estimating my

Wor

kers

monthly expenses

50%

49%

41% Ret

irees Making the most out

of Social Security

Health care expenses

Estimating my monthly expenses

49%

45%

39%

Shifting into high gear

People who have a long-term financial plan and a contingency plan for when the unexpected happens are the elite athletes of retirement. Financial advisors and retirement plan sponsors can help all savers develop planning skills that are most likely to improve their financial outlook.

It takes practice to spend less and save more. Starting with smaller and more achievable steps reinforces the saving behavior and builds confidence to move to the next level.

• Focus on developing and executing a comprehensiveinvestment plan.

• Use a goal-based approach with visual tools includingdashboards and personal financial apps.

• Create more personalized communications that areengaging and target specific actions.

• Add behavioral nudges like automaticity at key inflectionpoints to help improve success rates.

• Encourage family discussions about money, boostingconfidence and positively impacting relationships.

• Build in annual check-ups to help stay on track.

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Making it to the finish line

Today’s retirees are living a 20th century retirement in the 21st century — with predictable pension and Social Security benefits funding their retirement years while the expected costs and uncertainty of retirement climb higher. Tomorrow’s retirees will need targeted solutions to manage these challenges, plus the financial stress that goes along with them.

Conducting research into retirement saving helps us define and create potential solutions that can make a difference.

Together with financial advisors and retirement plan sponsors, we can help prepare savers to achieve long-term financial well-being.

Contact us to continue the conversation:

retirementstudy@wellsfargo.com

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About the survey

On behalf of Wells Fargo, The Harris Poll conducted 3,918 online interviews of 2,708 working Americans age 18–75 and 1,004 retired Americans, surveying attitudes and behaviors around planning, saving, and investing for retirement. The survey was conducted June 21–July 17, 2019. Working Americans are age 18–75 and working full time (or at least 20 hours if they are working part time) or are self-employed. Retired Americans self-identified as retired regardless of age. Both working and retired Americans are the primary or joint financial decision-maker for their household. High-net-worth workers have at least $1 million in household investable assets. Data were weighted as needed to represent the population of those meeting the qualification criteria. Figures for education, age, gender, race, ethnicity, region, household income, investable assets, marital status, employment, number of adults in the household, and propensity to be online were weighted where necessary to bring them in line with their actual proportions in the population.

All investing involves risk, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors, some of which may be unpredictable. Each asset class has its own risk and return characteristics.

Neither Lori Lucas or Employee Benefit Research Institute (EBRI) are affiliated with Wells Fargo.

This information is for educational purposes only and does not constitute investment, financial, tax, or legal advice. Please contact your investment, financial, tax, or legal advisor regarding your specific needs and situation. The information shown is not intended to provide any suggestion that you engage in or refrain from taking a particular course of action.

Wells Fargo Wealth and Investment Management, a division within the Wells Fargo & Company enterprise, provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company. Wells Fargo Asset Management (WFAM) is the trade name for certain investment advisory/management firms owned by Wells Fargo & Company. These firms include but are not limited to Wells Capital Management Incorporated and Wells Fargo Funds Management, LLC. Certain products managed by WFAM entities are distributed by Wells Fargo Funds Distributor, LLC (a broker-dealer and Member FINRA).

Brokerage products and services offered through Wells Fargo Clearing Services, LLC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.

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