The question of retirement preparedness is always a difficult one to handle since there are differences in lifestyle expectations and income sources. Life is complicated. And financial decisions have consequences that don't necessarily come to light until years after the decisions are made. That's something to think about during a time of holiday gatherings like Thanksgiving -- not only for ourselves, but also for younger family members who learn from watching our behavior.
Take, for example, a recent study reporting that only 17% of workers age 50-plus were "very confident" that they would be able to keep a comfortable lifestyle after they retired. Only 17%. Would they do things differently if given the chance? What choices did they make about consuming versus saving? How important was current lifestyle versus future security?
What about retirees? Only 23% of retirees were very confident about maintaining their lifestyles. See "Life in Retirement: Pre-Retiree Expectations and Retiree Realities" (tinyurl.com/5e83w7j8), released in September 2023 by the nonprofit Transamerica Center for Retirement Studies, in collaboration with Transamerica Institute.
Lower that standard to "somewhat confident," and you'll find a larger group (45% of workers and 49% of retirees).
When asked about the greatest fears related to retirement, both workers and retirees reported "Outliving my savings and investments" (45%; 32%) and "Social Security will be reduced or cease to exist in the future" (42%; 39%).
Also under the category of greatest fears about retirement: "Declining health that requires long-term care" was cited by 41% of workers 50 and older, and by 35% of those who are retired. A similar category, "Possible long-term care costs," was selected by 35% of those 50-plus and 28% of those retired.
Another financial concern is debt. Among retirees surveyed, 48% agreed with the statement "Debt interfered with my ability to save for retirement." Among workers 50 and older, 35% cited "Paying off credit card debt" as a financial priority.
Along with planning for retirement, there is also planning for the inevitable, something most people do when thinking of others -- spouse, family, etc. According to the study, 69% of retirees and 56% of workers 50 and older have at least one or more key legal documents. The most common one is a last will and testament (51% of retirees and 39% of workers 50 and older). Only 25% of retirees and 15% of workers ages 50 and older have established funeral and burial arrangements.
There are many financial issues to consider when it comes to retirement. Examining them as early as possible can pay off in the long run.
What can you do? Importantly, what can you do now?
Here are three recommendations from the study that you can apply right now:
-- "Save as much as you can. Strive to live within your means and set aside additional savings."
-- "Prepare a written financial plan to help ensure that your savings last your lifetime. Factor in living expenses, debt repayment, savings and investments, sources of guaranteed retirement income, health care needs, insurance protections, investment returns, inflation, taxes, the possible need for long-term care, and a potential legacy. Seek professional advice, if needed."
-- "Put your financial affairs in order and establish legal documents, as needed, including a financial power of attorney, a power of attorney for health care or medical proxy, a HIPAA waiver, an advance directive or living will, a last will and testament, funeral and burial arrangements, and/or a trust."
If you follow my writing and listen to my talks, you'll know that I'm a fan of starting one's financial education early in life -- well before age 50 and certainly well before retirement. The fact is that our choices define our lives. Some choices need to be viewed in the context of the decades ahead that become history in the blink of an eye.
On another note: The deadline to apply for the 2023 401(k) Champion Award, which honors 401(k) participants who optimize their 401(k)s, has been extended to Dec. 14. To compete for the award, go to 401kchampion.com.
DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION