It’s a topic on everyone’s mind but about which no one wants to talk.
For the first half of our lives, it feels too far away. Then, suddenly, it’s so close it’s scary. Retirement and, consequently, retirement planning bring with them the reality of our inevitable demise and a barometer of our career and financial success.
These, alone, may be why talking about money is so taboo. Even if we’re financially ready to retire, we’re rarely emotionally ready for what follows. To avoid thinking about the former in order to avoid thinking about the latter is an exercise in self-sabotage, and for a community that has enough hurdles, retirement planning can’t be talked about enough.
Fortunately, financial services companies are trying to better understand the different demographics of their clientele and the population, in general, to better serve all demographics that make up the fabric of our country. To better understand the state of retirement for LGBTQ Americans, MassMutual recently conducted its LGBTQ Retirement Savings Risk Study. The survey included two groups of queer people.
MassMutual’s ‘LGBTQ Retirement Savings Risk Study’
This study was an online survey of the general population that over-weighted certain demographics, including the LGBTQ community, at two ages or life-stages. The first age or life-stage was “pre-retirees” within 15 years of retirement, who worked full time in the private sector, had minimum household incomes of $40,000 a year and contributed to defined contribution plans. This group included a total of 804 people.
The second age or life-stage included retirees who were no more than 15 years into their retirement, had at least $100,000 in total investable assets, previously worked full time in the private sector and contributed to defined contribution plans. This latter group included a total of 801 people.
Not to be confused with the general population or the queer community as a whole, LGBTQ respondents in this study at both ages or life-stages were more confident about their retirement income. However, this confidence may not be based on sound fundamentals but instead on thinking errors of how long we’ll work or how long we’ll be in retirement.
LGBTQ respondents were more likely to take risks, even more than they think
Both LGBTQ pre-retirees and retirees were more likely than the general population, 31% versus 22% respectively, to take more investment risk than they should. Regarding investing styles, LGBTQ respondents (65%) were more likely to be focused on growth than the general population (52%) having at least a moderate growth investing profile and only 8% investing for capital preservation.
To the contrary, more LGBTQ respondents said they felt more aligned with a conservative investment style, 42%, than a growth investment style, 28%. This may be why more LGBTQ respondents, 62%, than the general population, 49%, were advised by a financial advisor to change their investment mixes as they approached retirement.
LGBTQ respondents plan on fewer retirement years, expecting savings to last longer
The median expectation for years in retirement for LGBTQ people was 22 years, compared to 24 years for the general population. However, the median years for how long their savings will last was 25 years for both LGBTQ respondents and the general population. Comparatively, LGBTQ respondents believe they’ll have a three-year buffer and non-LGBTQ respondents a one-year buffer for their retirement savings to help them live comfortably.
Fortunately for LGBTQ respondents, they were more likely to agree that their investment growth needs to continue through their retirement by 65%, relative to 59% of the general population. Charles Schwab, the founder of The Charles Schwab Corporation, advised readers of his book, You’re 50 – Now What? to continue investing for growth to a degree through retirement, though not at the expense of adequate capital preservation.
LGBTQ respondents were less likely to trust financial services, and our actions show it
LGBTQ respondents to this study were more likely than the general population to report not working with a financial advisor, 44% versus 35%. This may, in part, be because, per MassMutual’s 2017 LGBTQ Financial Security study, 59% of the LGBTQ community believe that financial advisors either don’t know how to or don’t want to help people like us.
Surprisingly, LGBTQ respondents were more likely, 53%, than the general population, 54%, to be concerned about making poor investment decisions, and LGBTQ respondents (74%) were more likely than the general population (72%) to be concerned with market volatility.
LGBTQ respondents were less likely to use financial products
Twenty-two percent of LGBTQ respondents said that they didn’t own any financial products, such as life insurance, pension plan annuity or long-term care insurance (LTCI), as compared to 13% of the general population.
Only 54% of LGBTQ respondents, relative to 69% of the general population, said they have life insurance. Part of this may be due to a misunderstanding that life insurance is only to protect our families after we pass away and, relative to the general population, fewer of us have families. However, from protecting your family from creditors to leaving a donation to a favorite non-profit or charity to covering terminal medical care with an accelerated death benefit rider, today’s life insurance covers much more than it used to cover.
Somewhat disconcertingly, only 20% of both the LGBTQ respondents and 20% of the general population said they’ve purchased long-term care insurance. According to the U.S. Department of Health and Human Services, the lifetime probability of becoming disabled and needing long-term care affects 52% of all people over the age of 65. The average cost of assisted living is “$119 per day, $3,628 per month and $43,536 annually.” This is how LTCI can be a solution for those who qualify and purchase it.
LTCI issues payouts for medical and assisted living expenses when there aren’t family or friends available or capable of offering such care. With fewer LGBTQ people having children to potentially rely on in our later years, more of us should purchase LTCI and, as with most insurance products, the younger we purchase it the better. LTCI can cover end-of-life needs and in-home and nursing facility costs.
The fact of the matter is, in part because of advancements in HIV and AIDS prevention and treatment, we as a community can no longer afford to have a carpe diem approach to retirement planning. Despite what we truly believe or what we want to believe, retirement is a more precarious stage of life for LGBTQ people than for our straight peers because of the unique fabric of our community. For these reasons, we need to have more honest conversations about retirement and take appropriate measures to protect ourselves in retirement so that we live out our remaining days as best we can based on our terms and not our circumstances.
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