Is retirement still a reality? Yes, but it’s a shifting and evolving reality.
“Retirement” Is Outmoded:
Traditional notions of “retirement” are outmoded. In particular, the expectation that people should want (or be forced) to stop working at age 65 no longer makes sense in a world in which people live longer, live healthier as they age, and the ratio of old to young is considerable and growing.
Yet as longevity has increased over the past century, we’ve tacitly tacked all the added years on at the end. Apart from the undesirability of making “old age” the longest phase of one’s life, it’s unrealistic to expect that most workers will be able save enough over the course of a 40-year working life to fund a possible 30-year (or longer) retirement.
There should be no hard boundary on where work ends and retirement begins. Instead, we need to think in terms of a new “life script” that allows for greater flexibility, time off or part time work mid-career, more opportunities for education and retraining across our life course, and “phased retirement” in which people reduce their hours, shift into less demanding roles, and so on, but not abruptly leave the workforce at some pre-set (and arbitrary) age.
Working Longer Is Good for Everyone:
Research shows that working longer is good for people, companies, and the broader economy.
Remaining active, including work, improves mental health, which in itself can lead to better physical health. Staying employed, and the resultant better health, leads to greater financial well-being. For instance, one of the most impactful ways to improve one’s retirement finances is simply to work a bit longer
For companies, it’s been shown that intergenerational workforces—mixes of older and younger workers—are more productive than those of predominantly one age group. Retaining older workers also helps firms avoid “brain drain”—especially by workers trained in skills that are in short supply among younger workers. Studies also show that when people work longer, overall productivity and GDP rise.
Fears of older people keeping or taking jobs, instead of making way for the young, are without foundation. Yet—while without basis—this fear is real and will have to be addressed.
The Overabundance of the Unprepared:
The 2013 Employee Benefit Research Institute’s Retirement Confidence Survey of workers aged 55 and older revealed that 60% of workers have less than $100,000 in retirement savings, 43% have less than $25,000 and 36% have less than $10,000 saved.
With medical bills alone expected to total $215,000 in the last 20 years of a couple’s life, the average retirement nest egg of $44,000 (or $88,000 per couple) is hardly enough to cover even half of their projected medical expenses- let alone housing, food, and other basic necessities.
Why the enormous lack of savings? Many Americans site the fiscal demands of daily life on limited income- in fact, 80% of people making less than $50,000 a year say it’s hard to keep up with bills and save for retirement at the same time.
Finding or Funding Your Retirement Reality:
So what does it take in today’s world to keep retirement a reality?
- Having a goal based financial plan. Being able to measure your success and overcome the bumps of life require a plan. Does your plan need to be 30 pages long? No, a simple plan, even one page that keeps you focused and on track can be the cornerstone to success.
- Staying on Track with Savings.While changes in pensions, employer 401(k) matches, and social security may be uncertain and ever evolving, prioritizing personal savings is sure to remain a key ingredient in a well-funded retirement.
- Living within ones’ means is not only an essential ingredient of fulfilling the retirement reality in an individual’s working years, it’s also a key ingredient of a successful retirement lifestyle. By enjoying a reduced cost of living, retirees use up less of their overall savings, allowing it to last longer and ensure sufficient coverage throughout their golden years
- In addition to withdrawing from personal savings and collecting on whatever pension and social security is available, retirees can benefit by having diverse streams of income- part-time jobs, owning their own businesses, renting out a room in their home, etc.
At Tannery & Company, we believe that knowing where you stand is the first step to reaching your goals. With our Advizr Goal-Based Planning it is easy to see how changes in saving, spending, and retirement age will impact the likelihood and timing of reaching your retirement goal.
Lots of people will be happy to find they are in better shape than they thought. Those that aren’t can start making the right steps to improve the situation. Contact us today to see where you are in making your retirement a reality.
PS Thanks to all of you that reached out with toasts and prayers. I was a very happy Father of the Bride
Michael Tannery CPA CDFA™ AIF® ● CEO
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