Retirement Reality Check

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The fantasy of what retirement will look like and the reality are sometimes very different. How much you have saved versus how long you can live a particular lifestyle can sometimes fall into the category labeled “unrealistic”. Though not for lack of trying, many retirees find that the life that they had in mind for retirement does not match up perfectly with their budget based on their retirement income sources. As a result of this disparity, many still working Baby Boomers plan to continue working past the age of 65 or don’t see themselves retiring at all.[i] A third of boomers plan to still earn a steady income during their retirement. The fact is, a majority of boomers do not have the retirement savings to support themselves without working. A paltry 15% feel they have saved enough to retire. Additionally, one-third of those nearing or in retirement have not devised a written plan or strategy for their retirement assets and income.[ii]

Part of the challenge in funding retirement is that people live a lot longer. A person who retires at 65 can be expected to live another twenty years.[iii] Someone thinking they will just continue to work at their current job, for their current pay indefinitely is, unfortunately, being unrealistic. While age discrimination is illegal, many companies find a way to push older workers out in order to establish younger professionals in leadership positions. As a result, those who were hoping to stay in their position are laid-off or demoted.[iv]

Unrealistic Retirement Goals

Currently, only 6% of current retirees are earning an income from working. Mercifully, because of Social Security and Medicare, seniors do have some safety net. In the not too recent past, a third of seniors lived below the poverty line and as of 2012, that number has reduced to just 9%.[v] But living comfortably and living above the poverty line are two very different things. As the responsibility for their employees, through managed pensions, were replaced by employee-run 401Ks combined with the rise in cost of living, health care expenses and extended lifetimes, the challenge of retiring well or merely surviving has been left on the shoulders of individuals alone and not shared between businesses and their team of loyal staff.

 


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Life Happens

The harsh reality is that the money saved for retirement combined with unrealistic future income from working will not add up to a secure retirement. The costs for basics like housing and medical care alone can easily devour the nest egg or emergency funds over a period of just a few years (if expenses are particularly high), let alone thirty.[vi] While It’s a good and proactive attitude to plan to work through retirement to cover the costs, unfortunately, it may prove unrealistic for most. Nearly half of current retirees retired earlier than planned.[vii] Few employers offer a part-time transition for retirement-age workers or flexible work arrangements. Many who do continue to work will often end up doing so for less pay. On top of that, life starts to get in the way of the plan to work late into life: layoffs, health, job scarcity, caring for an ailing spouse, and of course, age discrimination may be contributing factors. This is especially true for women, who tend to both live longer and take over family caretaker roles.

Looking Ahead

So, what can be done? Hindsight is often 20/20 so the important thing is to take the time and make a real plan. Learning from those who’ve retired in advance is key to that plan. The majority of retirees wished they had saved more and educated themselves about tax planning, organizing documents and plans for their estate, long-term investing, Social Security benefits, and how to manage finances for retirement while they were still working. They regretted not seeking out professional advice to assist in planning and managing their retirement. They also wished their workplaces had provided more information and assistance about retirement planning.[viii]

Taking the above advice and applying it to your own retirement situation could be of great benefit. Manage your health as best you can, as the majority of unanticipated early retirement and costs in retirement are due to poor health. Save more, reduce your debts, educate yourself regarding Social Security and Medicare. Examine your living expenses and create a realistic budget. Devise a plan on how to get there. Taking the time to educate yourself about investing and saving, reaching out to professionals, and being proactive about this next chapter in your life can help you and those you love to gain confidence about the future.

Use Your Resources

If you plan to work into your retirement, take steps in advance to understand what would happen in different scenarios, like researching how a change from full to part-time would impact your life, could make a world of difference. Attending workshops and events to educate yourself on retirement and financial investing will not only benefit you but everyone in your life.

Like so much in life, being proactive and forming a plan, can stave off a lot of stress and challenge later. The goal is to retire well when you are ready and on your terms. Any help you can glean from those who’ve retired before you, or your current employers, will be invaluable.


[i] https://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf

[ii] https://www.transamericacenter.org/docs/default-source/retirees-survey/retirees_survey_2015_report.pdf

[iii] https://www.cdc.gov/nchs/data/hus/hus16.pdf#015

[iv] https://www.cbsnews.com/news/the-new-low-wage-reality-for-older-americans/

[v] http://time.com/money/4489827/poverty-among-seniors-has-dropped/

[vi] https://www.washingtontimes.com/news/2017/oct/2/aging-americans-cant-afford-retirement/

[vii] http://time.com/money/4483741/age-discrimination-older-workers-retirement/

[viii] https://www.marketwatch.com/story/the-best-retirement-advice-from-people-who-should-know-2017-06-07