How much will you actually spend in retirement? That depends on a lot of factors,…
Most new retirees and those approaching retirement say they’re short of what they need for retirement, but nevertheless are confident in their prospects for a successful retirement. The majority of retirees left the workforce earlier than planned. Most retirees are in good health and expect a long retirement. The vast majority of retirees are happy and enjoying life.
The Transamerica Center for Retirement Studies just released the results of its 16th annual retirement survey, and those are some of the major findings. The survey results are always enlightening, and reinforce timeless lessons for those preparing for retirement.
People are living much longer than in the past, but the age at which people retire hasn’t changed. So people correctly expect a long retirement (28 years is the median length of expected retirement; 41 percent of survey respondents expect a retirement of over 30 years). This underscores the need for proper planning before and during retirement.
Yet very few retirees have a formal plan for their retirement. Over half of respondents (54 percent) say they have a retirement strategy, but just 10 percent have a written plan. Forty-two percent had no plan before retiring. Among retirees with a retirement strategy, most consider Social Security and Medicare benefits (88 percent) into their thinking.
Social Security is the foundation of financial planning for most retirees: 89 percent cited it as a source of retirement income, followed by other savings and investments (48 percent), pensions (42 percent), and 401(k)s/403(b)s/IRAs (37 percent). Almost two-thirds of retirees (61 percent) report that Social Security is their main source of income.
The median age for claiming Social Security benefits is age 62, which gives the lowest benefit amount. Only one percent of respondents waited to age 70 to begin receiving Social Security retirement benefits, the age which gives the highest lifetime benefit amount.
As for other aspects of retirement planning, many retirees include in their planning ongoing living expenses (71 percent), healthcare costs (60 percent), a budget for basic living expenses (60 percent), total savings and income needs (60 percent), and investment returns (56 percent).
When preparing for retirement, most focus on the financial aspects. But the nonfinancial part is equally important, and overlooked by many retirees. Only 31 percent considered pursuing retirement dreams in their planning.
Additionally, although someone age 65 has a 70% chance of needing long-term care during their lives, only 23 percent of retirees included long-term care insurance in their planning. Long-term care is, however, a common concern among retirees: 44 percent cited declining health that requires long-term care as their greatest retirement fear.
Retirement advisors recommend including your spouse in retirement planning and discussions. Current retirees, particular those older, do a fairly good job of this. Among retirees who are married or in a civil union, 62 percent are very familiar with their spouse/partner’s retirement plan and savings. This familiarity rate is much higher among retirees ages 70+ (69 percent) than those age 65-69 (53 percent).
Retirement advisors also recommend that retirees have a variety of activities on which to spend their time. Today’s retirees spend their time in a range of activities. The most popular ones are spending more time with family and friends (53 percent), pursuing hobbies (40 percent), and traveling (33 percent). Twenty-four percent are doing volunteer work and 11 percent are taking care of their grandchildren.
Retirees under age 65 are more likely than those 65 or over to be traveling (72 percent vs 62 percent) and pursuing hobbies (54 percent vs 42 percent). Retirees age 65 and older are more likely to be doing volunteer work.
Over half of workers age 50 and older (54 percent) say they plan to continue working at least part-time in retirement. But only 5 percent of current retirees are currently employed or self-employed.
As in previous surveys, the majority of retirees (60 percent) said they retired earlier than planned. This is especially true for retirees in their fifties (79 percent). Two-thirds (67 percent) of retirees in their sixties and 53 percent of retirees in their seventies retired sooner than planned. Just 10 percent retired later than planned.
Reasons for retiring early included health and employment-related issues. Two-thirds (66 percent) cited employment-related reasons for retiring early. Age 70-plus retirees (70 percent) were most likely to have retired for employment-related reasons, while retirees in their fifties (52 percent) were most likely to cite heath issues. Only 12 percent of retirees of all ages who retired sooner than planned say they did so because they had saved enough money and chose to retire.
The survey has good news for people nearing retirement: most retirees agreed that they were generally happy (94 percent), were enjoying life (90 percent), and had a strong purpose in life (84 percent). Sixty percent of retirees indicated their standard of living had stayed the same since they retired; 10 percent say their standard of living had improved and 28 percent say it had declined. Forty-four percent of retirees indicated that their enjoyment of life had increased since entering retirement, while 34 percent said it had stayed the same, and 19 percent of retirees said it had decreased since they retired. Approximately half of retirees in their fifties and sixties indicated their enjoyment of life had increased since entering retirement, compared to 37 percent of retirees in their seventies.