Picking the optimal retirement age is a complex balancing act among several factors. On the…
If you’re approaching retirement and are feeling uneasy about your financial readiness, the latest Retirement Confidence Survey by the Employee Benefit Research Institute has some good news. A recent survey of actual retirees found their financial issues, for the most part, weren’t all that severe.
The majority (82%) of retirees who retired when planned, found their experiences with regard to finances were at least as good as they had expected. That’s key, retiring when planned. For those who retired earlier than planned, a narrower majority (59%) felt their financial experience was at least as good as expected. Furthermore, 40% of retirees reported having debt issues, but only about 15% felt their debt was a major problem.
Workers tend to be less confident about retirement than those who are actually retired. Retirees’ overall confidence in having a financially secure retirement has increased recently, with 28 percent very confident, and another 39% somewhat confident. By comparison, only 18% of workers were very confident about having a comfortable retirement.The percentage of retirees who were very confident of being able to meet basic expenses was 39%, whereas 29% of workers indicated they were confident they would have enough to pay for basic expenses in retirement.
Medical expenses are a big concern for many people, and only 24% of of workers were confident in their ability to handle medical expenses in retirement. But about 60% of surveyed retirees felt their healthcare expenses were below or about the same as they expected.
You might be thinking that the retirees tended to be confident about their finances because otherwise, they wouldn’t be retired. There is support for this viewpoint. A successful retirement begins with a sound plan. Workers participating in a retirement plan, such as an IRA or employer-sponsored retirement plan tended to be much more confident in their retirement readiness. Among workers with a plan, 24% were confident in their retirement readiness compared to 9% without a plan. Only 11% of workers in a plan were not at all confident about their financial security in retirement, compared to 46% of workers who were not in a plan.
Sixty percent of those retired indicated they did some form of financial planning for retirement. Forty-two percent said they began planning 20 years or longer before they retired, 27% reported they started 10 to 19 years in advance, and 25% said they started planning less than 10 years ahead. Nineteen percent of workers and 25% of retirees report they consulted a paid financial advisor.
Additionally, workers who participate in a retirement plan tend to save more. Of those who indicated they or their spouse had a retirement plan, 33% reported savings of $100,000 or more, and 11% reported they had savings of less than $1,000. For those who indicated they didn’t have a plan, 73% reported assets of less than $1,000 and just 3% reported they had assets of $100,000 or more.
The lesson here? You may be more financially ready for retirement than you think, at least if you have a plan. The saying, “failing to plan is the same as planning to fail” applies to retirement. Consult a professional financial advisor if you need to, or consult reliable online resources. The AARP retirement planning calculator can help you get started. You should also realize that you might be retiring earlier than expected. Although 9% of workers said they planned to retire before age 60, 35% of retirees actually did so. While 22% of workers planned to retire at age 70 or later, just 9% of retirees actually did.