The Changing Face of Retirement March 2013

Objectives Understand the mindset of recent and soon-to-be retirees. Is it changing? Compare and contrast attitudes and beliefs of the near retirees and recent retirees Provide insight to financial services firms regarding strategies they could employ to secure retirement investment assets Understand retirement saving, planning, and investment behavior Methodology 1 Who: Recent Retirees (retired within past three years) and Near Retirees (anticipate retiring within next five years) Retirement savings of at least $100,000 Age 50 to 70 What: Online survey among a national sample of 500 Recent Retirees and 500 Near Retirees Data collected in December 2012

Respondent Profiles 2 Number of Years Until Retirement Average Age Plan to Retire: 64.6 Years Old Number of Years Since Retirement Average Age Retired: 61.6 Years Old Near Retired (plan to retire within next five years) Recent Retired (retired within the past three years) Anticipated Retirement Savings Retirement Savings

Key Findings The concept of a “retirement age” is passé. Retirement savings of $500k appear to be a tipping point as wealthier retirees view their retirement more positively Retirees who begin saving early hold nearly 60% of retirement assets, but about 40% wait until within ten years of retirement to begin planning When selecting specific investment vehicles, retirees focus most on security of investment principal and investment performance Key investment firm selection criteria include stability, reputation, advisor expertise, and investment performance record Nearly two-thirds of recent retirees selected advisors before retiring and about one-fifth select an advisor after retiring About 50% of retirees have reinvested their retirement funds within three years of retiring, up from about 40% in 2005 Nearly 40% of people planning to retire within the next five years are in the process of deciding how to reinvest their retirement funds 3

Working During Retirement The concept of a “retirement age” is passé Near retirees are more inclined to work during retirement than recent retirees Very few plan to move into a second, full-time career 4 Retirement Classification  43% of those who plan to retire within 3 yrs., 57% who plan to retire in 4-5 yrs. “I Believe Retirement Is An Outdated Concept”  Significantly Higher

Retiring When Planned? About one-third of Near Retirees expect to delay their retirement Reality may impact those plans though -- 31% of those retiring early were laid off, 14% retired because of disability, and 11% were offered early retirement 5 Retirement Timing    Significantly Higher

Proprietary and Confidential © 2013 Maritz Retirement Attitudes 6

7 Financial Security During Retirement Recent retirees are more optimistic regarding their financial security than near retirees, perhaps because they have made decisions and removed the uncertainty   79%  Significantly Higher

8 Retirement Attitudes in 2012 Concerned about having enough money to last through retirement Concerned about having to provide for parents or adult children Believe will have to work during my retirement Concerned home equity will not provide expected retirement income 2 Believe prepared for health care expenses % Strongly Agree/Agree Confident have saved best as possible for retirement Fear pension income will not pay out as promised 1 Notes: 1 of those with pensions ; 2 of those with home equity Near retirees’ attitudes reflect their uncertainty. Compared to recent retirees, near retirees are more concerned about having sufficient funds through their retirement and feel less prepared for health care expenses.  Significantly Higher

Retirement Attitudes in 2012 Wealthier near/recent retirees view their retirement more positively. Investment savings of $500k appear to be a perceptual tipping point. 9 Near RetiredRecent Retired % Strongly Agree/Agree < $500k$500k+<$500k$500k+ The concept of a “retirement age” is outdated 61%59%56% Concerned about having enough money to last through retirement 54%  35% 39%  20% Believe prepared for health care expenses 43% 61%  59% 78%  Fear pension income will not pay out as promised 1 25%16% 17%  6% Concerned home equity will not provide expected retirement income 2 38%  19%18%13% Believe will have to work at some point during my retirement 45%  30% 18%  7% Confident have saved best as possible for retirement 68% 81%  61% 79%  Concerned about having to provide for parents or adult children 20%15%16%13% Notes: 1 of those with pensions ; 2 of those with home equity  Significantly Higher

10 Attitudes Among Recent Retirees: Confident have saved best as possible for retirement Concerned about having enough money to last through retirement Confidence to make investment decisions on own Believe will have to work during my retirement Confused by options available for investing retirement funds Believe prepared for health care expenses % Strongly Agree/Agree Recent retirees feel more prepared to handle their health care expenses in 2012, perhaps a reflection of perceptual changes caused by health care reform  Significantly Higher

Saving and Planning 11

Saving and Planning Timing – Near Retired 12 Note: Early (26+ yrs.), Mid-Range (11-25 yrs.), Late (<= 10 yrs.) Near retirees consider saving and planning as separate activities Early savers accumulate most of the retirement dollars (57%), but many do not begin to plan until years (47%) or less than 10 years (38%) before they retire  Significantly Higher Saving (contributing to a retirement plan) Planning (making specific financing plans)

Saving and Planning Timing – Near Retired 13 Planning Early Mid- RangeLate Saving Early 15%16%17% Mid- Range 1%29%18% Late 0%1%3% Number of Near Retirees Planning Early Mid- RangeLate Saving Early 17% 23% Mid- Range 1%24%14% Late 0%1%3% Near Retirees - Dollars Note: Early (26+ yrs.), Mid-Range (11-25 yrs.), Late (<= 10 yrs.) Firms should target people as early as possible during the planning phase. The prime targets include: The 29% who begin saving and planning between 11 and 25 years before retiring that hold 24% of the retirement dollars The 17% of early savers who begin planning within 10 years of retirement that hold 23% of the retirement dollars  Significantly Higher

Saving and Planning Timing – Recent Retirees 14 Note: Early (26+ yrs.), Mid-Range (11-25 yrs.), Late (<= 10 yrs.)  Significantly Higher Saving (contributing to a retirement plan) Planning (making specific financing plans) Recent retirees consider saving and planning as separate activities Early savers accumulate nearly 60% of the retirement dollars, but most do not begin to plan until years (40%) or less than 10 years (44%) before they retire

Saving and Planning Timing – Recent Retired 15 Note: Early (26+ yrs.), Mid-Range (11-25 yrs.), Late (<= 10 yrs.) Firms should target people as early as possible during the planning phase. The prime targets include: The 18% of early savers who begin planning within 10 years of retirement that hold 26% of the retirement dollars The 24% of mid-range savers that hold nearly one-fifth of the retirement dollars who begin planning between 11 and 25 years before retiring Planning Early Mid- RangeLate Saving Early 15%16%18% Mid- Range 1%24%23% Late 0% 3% Number of Recent Retired Planning Early Mid- RangeLate Saving Early 17%16%26% Mid- Range 1%19%14% Late 0%1%3% Recent Retired - Dollars  Significantly Higher

Confidence retirement will cover expenses of my lifestyle Will need less income by downsizing and reducing lifestyle Ability to live comfortably and leave an inheritance Reaching a particular age Accumulation of a pre-set sum of money Projecting the need for additional income as I age Company policy regarding retirement 16 Retirement Strategy Retirement strategy is predicated most on feeling confident one can maintain their desired lifestyle Near retirees are more inclined to downsize and scale back their lifestyle % Primary Strategy  Significantly Higher

17 Recently Retired Segment Comparison – 2005 to 2012 Recent retirees were segmented based on their actions/intentions regarding employer-sponsored retirement plan funds: “Staying Put”: No immediate plans to move 401(K) savings “Transitional”: In decision-making mode “Reinvestor”: Have/will move savings into a tax-free account “Withdrawer” : Have/will with withdraw funds and not place them into a tax-free account More retirees made decisions regarding reinvesting their retirement savings within three years of retiring in 2012 than in 2005     Significantly Higher

18   Recent retirees were segmented based on their actions/intentions regarding reinvesting employer-sponsored retirement plan funds: “Staying Put”: No immediate plans to move 401(K) savings “Transitional”: In decision-making mode “Reinvestor”: Have/will move savings into a tax-free account “Withdrawer”: Have/will with withdraw funds and not place them into a tax-free account Approximately half of recent retirees have reinvested their savings, while over nearly 40% of near retirees are deciding how to invest their funds  Significantly Higher Segment Composition

Sources and Uses of Income 19

Sources of Retirement Income Near retirees expect to rely most on retirement investments while recent retirees rely most on pensions Although still a small percentage, near retirees anticipate relying more on employment income than do recent retirees 20 Retirement Income Sources (Percent Of Dollars)     Significantly Higher

Composition of Retirement Income Wallet – Near Retirees 21 WealthAdvisor Mean % Dollars< 500k$500k+YesNo Retirement Investment Vehicles 29% 36%  34%31% Pensions23%22%19% 25%  Government (including Social Security) 23%  17%20% Savings/Other Investments12%14% 14%  11% Home Equity6%5%6%5% Employment5%4% 5% Other2% 3% Wealthier near retirees present the greatest opportunity for investment firms because they rely more on retirement investments Firms should consider providing education to near retirees who rely on pension income and don’t use an advisor regarding options for investing pension funds  Significantly Higher

22 WealthAdvisor Mean % Dollars< 500k$500k+YesNo Retirement Investment Vehicles 25% 30%  29%  22% Pensions 32%  26%27% 34%  Government (including Social Security) 22%21% 23% Savings/Other Investments 12% 16%  14%13% Home Equity 5%4%5%4% Employment 1% Other 3%2%3% Composition of Retirement Income Wallet - Recent Retirees  Significantly Higher Wealthier recent retirees present the greatest opportunity for investment firms because they rely more on retirement investments and have other savings Firms should consider providing education to recent retirees who rely on pension income and don’t use an advisor regarding options for investing pension funds

Retirement Income Allocation Uses of Retirement Income (Percent Of Dollars)   Daily living expenses consume most retirement income, followed by health care expenses and major purchases Near retirees expect to spend a greater portion of their income on health care than recent retirees More prevalent among those with $500+ in investment savings  Significantly Higher

Investment Firm and Advisor 24

Financial Advisor Usage More recent retirees than near retirees work with a financial advisor Nearly 90% of recent retirees with an advisor established that relationship before retiring 25 Working With An Advisor    Significantly Higher

Financial Advisor Usage: 2005 vs Nearly two-thirds of recent retirees work with an advisor. This usage rate has remained unchanged from 2005 to Recent Retirees Working With An Advisor  Significantly Higher

27  Significantly Higher – 2005 vs Timing of Working With An Advisor – Recent Retirees Financial Advisor Usage Among Recent Retirees: 2005 vs More recent retirees selected advisors before retiring in 2012 (61%) than in 2005 (52%). Only about one-fifth select an advisor after retiring For those without an advisor before retiring …

28  Significantly Higher – 2005 vs Working With The Same Advisor – Recent Retirees Financial Advisor Usage Among Recent Retirees: 2005 vs Of those selecting an advisor before retiring, 84% remained with that advisor after retiring in 2012, up from 76% in 2005 Firms should seek to establish advisory relationships before an individual retires  Different Advisor Same Advisor For those with an advisor before retiring …

Quality of investment firm’s website Branch presence Health insurance planning capabilities Life insurance planning capabilities Tier 4 (<40% Influential) Reputation of investments firm (up from Tier 2) Financial strength of investment firm Understand my financial situation Investment performance track record (up from Tier 2) Financial advisor’s expertise Flexibility to allocate funds among investments Tier 1 (80%+ Influential) Quality of investment research and information Range of products Fees Relationship with financial advisor (up from Tier 3) Tier 2 (70-80% Influential) Recommendations Previous experience with investment firm Tax planning capabilities Ability to invest without need for a financial advisor Estate planning capabilities Tier 3 (40-70% Influential) 29 Investment Firm Selection Criteria Both near and recent retirees focus on a firm’s stability and reputation, the advisor’s expertise, and the investment performance record as they select an investment firm Note: (comparison to Tier in 2005)

30 Investment Firm Usage: 2005 vs Most recent retirees used a full service investment firm in 2012, followed by an independent advisor/firm. This usage pattern has remained unchanged from Type Of Investment Firm  Significantly Higher Note: Discount Brokerage and Mutual Fund Company Not Available For 2005

31 Type Of Investment Firm Investment Firm Usage Most near and recent retirees use a full service investment firm, followed by an independent advisor/firm  Significantly Higher

32 Retirement Investment Vehicle Selection Influencers Among Recent Retirees – 2005 vs Flexibility to reallocate funds among investments Fees or costs associated with investments Expected investment performance Security of investment principal Amount of income generated monthly Range of investment options % Influential Principal security and range of investment options have become more influential for recent retirees when selecting specific investments  Significantly Higher

33 Retirement Investment Vehicle Selection Influencers Flexibility to reallocate funds among investments Fees or costs associated with investments Expected investment performance Security of investment principal Amount of income generated monthly Range of investment options % Influential Principal security is the most influential investment selection criteria among both recent and near retirees Recent retirees focus more on investment performance and investment options, while near retirees care more about amount of monthly income  Significantly Higher

34 Satisfaction With Retirement Investment Firm  Significantly Higher Investment Firm Satisfaction Near and recent retirees are generally satisfied with their investment firms

Key Findings and Recommendations The concept of a “retirement age” is passé. Firms need to view a retirees situation broadly and develop a personalized plan. Retirees who begin saving early hold nearly 60% of retirement assets, but about 40% wait until within ten years of retirement to begin planning. Firms should realize considerable potential exists within those nearing retirement. Nearly two-thirds of recent retirees selected advisors before retiring and about one-fifth select an advisor after retiring. Firms should focus on securing advisory relationships as early as possible. Retirement savings of $500k appear to be a tipping point as wealthier retirees view their retirement more positively. Firms should develop different value propositions for investors above and below the $500k level. 35

Key Findings and Recommendations When selecting specific investment vehicles, retirees focus most on security of investment principal and investment performance. When developing retirement plans advisors should ensure they address these criteria. Key investment firm selection criteria include stability, reputation, advisor expertise, and investment performance record. Firms should emphasize these criteria as they market retirement services. About 50% of retirees have reinvested their retirement funds within three years of retiring, up from about 40% in Firms should focus on securing advisory relationships as early as possible. Nearly 40% of people planning to retire within the next five years are in the process of deciding how to reinvest their retirement funds. Firms should consider this group a primary target because the money is in transition. 36

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