Retirement is front and center in the media. With the baby boomers (born between 1946 and 1964) retiring in droves, there’s abundant conversation about how to best prepare for retirement along with the consequences of avoiding retirement-planning groundwork. This article explores research-based retirement facts and figures, gives you a retirement to-do list and finally offers a wake-up call with the consequences of not planning for retirement.
Retirement Facts and Figures
- The average retirement age was 64 for men and 62 for women in 2013 (the most recent year for which data is available), according to Alicia Munnel’s article, “The Average Retirement Age – An Update” from the Center for Retirement Research at Boston College.
- The average Social Security benefit check is $1,340 per month in 2016. Double that amount if you’re married and you’re looking at a paltry $2,680 per month. (Although the Social Security administration tallies the average combined benefit for couples as $2,212 in 2016). However you figure it, in most parts of the U.S. living on $16,080 per person per year in retirement isn’t easy.
- Integrate that information with the Social Security Administration’s (SSA) calculations that a 65-year-old man today will live on average until age 84.3 and a 65-year-old woman today can expect to live until approximately 86.6 years old. The SSA also found that 25% of 65 year olds can expect to live until age 90.
Thus, our first 3 retirement facts suggest that many individuals will retire between age 62 and 64, receive an average Social Security benefit check of $1,340 and go on to live approximately another 20 years.
Now, let’s take a look at some additional retirement facts and figures from a variety of recent studies.
- In 2015, 54% of senior workers over age 60 say they’ll work either full or part-time in retirement. That’s up from 45% in 2014 according to the 2015 annual CareerBuilder survey. That same 2015 CareerBuilder survey claims that 53% of workers over age 60 are delaying retirement. The survey goes on to report that 12% of workers fear they won’t ever be able to retire.
- The 2015 Employee Benefit Research Institute EBRI Retirement Confidence Survey of workers and retirees over age 25 found that 50% of workers retire earlier than planned – many due to hardships such as a disability, health problems, downsizing or other reasons. The same 2015 EBRI survey found that 16% of the workers surveyed claimed that their expected retirement age changed within the last year, with 81% of that group indicating that their planned retirement age has increased.
So, to sum up the current retirement facts and figures, the average annual Social Security benefit of $16,080 ($1,340 x 12) is a low living income. If you’re an average retiree, you’ll leave the traditional workforce in your early to mid-60’s and many of you will need to continue working in retirement. Finally, health issues contribute to some retiree’s decisions to leave the workforce.
These facts and figures paint a somewhat gloomy retirement forecast, and set the stage for the next section: Your Retirement To-Do List.
Your Retirement To Do List
Regardless of your current age, there are some fixes to help prepare for a successful retirement.
Ramp up your retirement account contributions: This could include funding a workplace 401(k) and/or your traditional or Roth IRA. Regardless of your current age, the more you sock away for retirement now, the sunnier your future will be. Whenever possible, strive to contribute the maximum amount to your retirement accounts.
Become financially literate: No one is going to fund your retirement but you! Read up and build confidence around some foundational financial strategies for retirement:
- 401(k) Tax Advantages
- 401(k) Basics for Your First Job
- Who Should You Trust With Your Retirement?
- 401(k) vs. Traditional IRA vs. Roth IRA vs. MyRA
Downsize your life: Especially after most of the kids are out of the house, think about shifting your lifestyle. Consider buying or renting a smaller place. This will proportionately reduce all housing related expenses, which are generally the largest budget items for most individuals and families. Are you leasing or driving a late model car? This is the number two expense on the budget. Trade down and you’ll slash payments, service and overall cost of ownership for your vehicle. Look for other ways to cut costs and transfer those savings into a retirement account.
Do a values inventory: Figure out what’s really important to you in life, then eliminate spending on items that aren’t on the list. If you like to cook, then don’t eat out as much and save on restaurant bills. If you’re handy, do the home repairs yourself. Switch out a $10 movie ticket for a $1 red box rental if you’re just as happy staying in. There are hundreds of small money adjustments that can lead to freed up cash for retirement savings.
Consequences of Not Planning for Retirement
The first section of this article, ‘Retirement Facts and Figures’ could also be flipped into the last. Those retirement realities paint a gloomy picture of low income in retirement coupled with loss of health and choice for some retirees.
The 2015 Transamerica Retirement Survey found that workers’ retirement plans revolve around leisure. Forty-two percent of those surveyed hope to spend more time traveling, 21% wish to spend additional time with friends and family whereas 15% would like to pursue hobbies. The commonality of these retirement plans are the necessity for financial resources and time. If you skimp on retirement planning, you may come up short financially and have less disposable time, due to the need to work longer.
Quite simply, the main consequence of not planning for retirement is a loss of control of your future. The Transamerica Retirement Survey shared that 44% of those surveyed are afraid of outliving their money. With that type of fear hanging over your head, it’s difficult to sit back and enjoy retirement.
Ask yourself if you are willing to make some saving, investing and spending shifts in order to shore up your retirement nest egg? The impact of starting now may cause temporary sacrifice, but in the long run, you’ll be happier and more prosperous.
Final advice: Choose low fee investments for your retirement account, so more money will be working for you.