“A study finds that men are far more motivated than women to retire so they can spend time with their spouses,” notes a recent article in The Wall Street Journal.
A Fidelity survey reveals about 60% of men wanted to retire so they could spend additional time with a spouse.
Meanwhile, 71% of women look forward to retirement to spend additional time with grandchildren.
Retirement decisions are based on a variety of factors, from a desire to spend more time with family, aspirations to travel, or to exploration of untapped interests.
But are consumers ready to consider and confront the pesky reality surrounding affordability of retirement?
Do workers accurately know their level of financial preparedness for retirement and have reasonable expectations about future lifestyle?
This week, a look at what consumers believe about their retirement prospects, what they expect, some unique challenges they may encounter, and new ways for workers to prepare for their golden years.
Do you know what your members are thinking?
‘Get your facts first, then you can distort them as you please.’ –Mark Twain
More workers feel confident about retirement, according to survey data from the Employee Benefit Research Institute. The percentage of those who were very confident about their ability to fund a comfortable retirement was “at record lows between 2009 and 2013” but is up 13% in 2013 to 2015’s 22%.
In 2016, 21% feel confident about affording retirement. The numbers of those “not at all confident” dipped from 2015’s 24% to 19% in 2016.
In sum, 69% say they or their spouses have retirement savings; “statistically equivalent to 67% in 2015.” But many indicate they have virtually nothing set aside.
In making assessments of retirement readiness, some consumers participating in the survey did so by guessing (39%). Some made their own estimates (26%), some used an online calculator (10%), and others contacted a financial advisor (22%).
Ten percent read about how much money they would need, 6% asked someone else, and 6% filled out a worksheet.
Those who have done calculations have higher savings goals.
A trend continues in the survey data: Many retirees found they had to leave the workforce earlier than they expected—true for 46% in 2016. Often, hardships like health issues, downsizing at work, or need to care for family members prompt workers to retire early.
“The financial consequences of an unplanned early retirement can be heavy,” the report notes. Such retirees “are more likely… to say they are not confident about having enough money.”
An article at mainstreet.com reveals “Why You Have No Idea How Much Money You’ll Need For Retirement.” The answer: Most consumers have not calculated requirements.
Indeed, a Voya Financial survey shows 74% of Americans have never made retirement calculations and 51% of those already retired “have never tried to determine if their current savings will be enough to last…”
Thirty-nine percent of retirees guess savings will not last 20 years, and “a full 13% of current retirees don’t know how much savings they have…in the first place.”
‘If you do not think about your future, you cannot have one.’ --John Galsworthy, English novelist
Consumer expectations and perceptions of retirement while still at work may not match reality once off the job.
According to Gallup, “Majority of U.S. Investors Carry Debt but Value Debt-Free Retirement.” Investors who have not retired are more inclined to say that being out of debt is “critical” (63%) than retired investors (40%).
Of nonretirees, 83% have some type of loan, compared to 54% of those already retired.
Gallup reports that “retirees are much more realistic” about debt.
“Retirement May Be Dicey for Single Women,” says CNBC. About 55 million single women “are in a far more precarious position than married women… As a result, they may face serious financial hardship.”
Approximately 40% of single women have less than $1,000 in retirement savings.
Most women don’t believe they will require as much money as men, even given their longer lifespans and higher retirement expenses.
But women are 80% more likely than men to live in poverty by age 65 or older.
“About 36% of unmarried women… think they’ll need to accumulate less than $20,000 for retirement.”
Long-term care is another expense women don’t like to discuss, according to plansponsor.com. Sixty-six percent of women fear they will become burdensome to family as they age, and 78% have concerns about adequate funds to manage long-term care.
Despite this, 62% fail to have such discussion with anyone, primarily because they do not want their loved ones to worry.
This lack of conversation may result in “more harm than good to women’s families.”
“Families need to be aware of what they will face if they do not plan ahead—both emotionally and financially,” notes an expert.
‘Our understanding is correlative to our perception.’ --Robert Delaunay, French artist
The literature reveals there is growing awareness of a retirement crisis. Some possible solutions are identified.
Gallup notes a “Flexible Retirement May Help Labor Markets and Well-Being.” The idea that workers remain on the job with flexible employment will come with benefit of greater financial security and overall improved wellness.
Plus, it would help combat the issue of a shrinking labor force.
“Is a Mandatory U.S. Retirement Saving Plan in Your Future?” asks Reuters. Speculation exists that 401(k)’s are “not up to the job of building a secure retirement for average Americans,” and Social Security will not sufficiently elevate incomes for retirees.
Guaranteed Retirement Accounts are a proposed solution. The idea is that workers own their accounts and contribute 1.5% of income, to be matched by employers. It would be offset by a tax credit.
Consumers would choose money managers who compete for the job “in a federally run exchange,” thus limiting costs. Upon retirement, savings would be converted to an annuity.
One final example is that of a “collective defined contribution plan” as reported at Bloomberg. Employers make contributions, as in a defined-benefit pension plan, although do not accept liability.
Rather, plans would be managed by trustees whose objective is to supply benefits equal to a traditional pension. To do so, they might alter vesting schedules, require greater employee contributions, or decrease benefits.
“Collective plans would offer pooling for…longevity and generational risk…those who die early subsidize those who live longer.”
Ultimately, “Solving a Retirement Saving Puzzle” requires consumers think about their retirement goals, financial requirements, and have understanding that even the best-laid retirement plans may not come to fruition.
Flexibility is key in retirement, notes the article. “You may need to work a little to make ends meet or be happy living on a reduced income.”