It was a dark and stormy… year; the bad news fell in torrents—except at occasional intervals when it was checked by a violent gust of new financial surprises which swept up the markets (for it is in our portfolios that our scene lies), rattling along our retirement savings, and fiercely agitating the scanty flame of retirement income that struggled against the darkening economy.
And, you thought that maligned opening line couldn’t get any worse? Sorry.
The fact is, no matter how you write it, the economy is frightening right now. But, the thing is, financial news is almost always full of scary statistics. The future is unpredictable and that can be terrifying. However, those scary facts are not necessarily your reality.
If you are a reader of this blog, then you are likely planning for multiple scary scenarios and are likely ready for a retirement without fear.
That being said, below are 13 of the scariest retirement statistics, but also how to plan for them so that you can safely turn out the lights on your career and avoid the things that go bump in the night, er retirement.
1. Millions Can’t Protect You from the Financial Goblins
Do you have a million dollars in the bank? Three million? Do you think that means you are blissfully prepared for a scare-free future? If, you have this kind of money, and are still feeling scared, you are not alone.
Recent research from Natixis Investment Partners found that millionaires were nearly as likely to say it will take a miracle to achieve a secure retirement (35%) as investors overall (40%). One key reason may be that the million-dollar mark may not be as significant as it once was.
The report found that the same worries apply, no matter your level of savings: inflation, interest rates, concerns about Social Security and Medicare, stock market returns and more.
Here are two tricks to knowing if you have enough:
- Forecast your future spending with as much detail as possible to determine how much you actually need. It may be $1 million. Or, perhaps you require far more or less.
- Prepare for all possible risks to your financial security: inflation, early job loss, economic turmoil, a major medical event, paying too much in taxes, and more.
The NewRetirement Planner can help guide you through these tasks.
2. Saving Too Much Can Be a Nail in the Coffin of the Life You Want
Two of the most popular articles on this blog this year had to do with people who have saved too much. Believe it or not, over saving is a big problem.
When you save too much and delay retirement, you are trading additional retirement security for years of your life spent doing the things you want to do. And, that is pretty scary. It is a fair trade off, but it is important to be mindful of your choices.
Have you ever watched a scary movie and urged the character on the screen to please make a different decision: don’t open that door, don’t go out into the night, don’t just don’t you plead with them.
Well, similar bad decisions are being made in today’s troubled economic landscape. Recent data suggests that a full 61% of millennials are apt to sell off some or all of their assets if the market indexes decrease 10% or more. Fewer, but still an alarming number of older generations say they would also sell off assets in a declining market. Thirty five percent of Gen Xers and 25% of Boomers would do the same.
Um… Don’t do it!
If you don’t absolutely need the cash, selling in a down market only insures financial losses. If you don’t sell, the odds are almost assured that you will regain and grow your savings.
Buy low. Sell high. If stocks are low, wait it out if you can. The markets have always bounced back and grown behind previous highs. Be patient.
Want more? Here are 22 of the most foolish financial decisions.
4. For Millennials, Monsters Are Not Only Under the Bed, They’re Everywhere
A report from Pension Research Council at Wharton School finds that millennials face the worst retirement prospects of all. The researchers estimate that if scheduled Social Security payments are fully paid, 38% of early millennials will have inadequate income at age 70 based on a 75 percent replacement rate adequacy threshold, compared with 28 percent of adults born 1937–1945.
The data suggests that the problems are multi faceted with median earnings for millennial males stagnating, marriage and home ownership rates are falling, and debt levels and out of pocket medical s spending rising for this generation.
And, to make matters worse, everyone in midlife faces a dizzying kaleidoscope of financial pressures. Home buying, child rearing, aging parents, keeping up with the Jones’ and more conspire to stretch income and make saving for the future very difficult.
Maintaining a budget and planning for the future can help alleviate these pressures. When things are overwhelming, it is important to focus on what you can control. Use the NewRetirement Planner to take control over your financial situation.
5. Norman Bates’ Mother, Well Older Women Anyway, Have Good Reason to Be Angry
Women live longer, earn less during their lifetime than men, and are less likely to have or earn retirement benefits. The result is that 13.2 percent of women 75 years and older live in poverty compared with 8.8 percent of men the same age.
If you are married, you and your spouse need to make sure that you plan for the financial well being of each of you. Go over your financial plan together and make sure that savings and income are adequate for the other after one of you are gone. If you are a single female, it is critical that you build the strongest plan possible for your future.
It is a great time to go through the NewRetirement Planner alongside your spouse to make sure that you are in sync with your plans.
6. Boo! Retirement May Sneak Up and Grab You Before You Are Ready
Many people plan to keep working past the traditional retirement age. And, if you like your job, delaying retirement is a great way to make your savings last into old age.
However, according to an EBRI report, almost half (47%) of retirees retired earlier than they’d planned. And, the majority (two-thirds) of that group said they retired for reasons outside their control. Those reasons included health problems, corporate downsizing, and changing job requirements.
Being forced into a retirement before you are ready is a real gotcha. If you aren’t retired yet, be sure to run retirement scenarios where you retire sooner than you think you will. Explore how to pay for or bridge these extra years of retirement. Popular options include:
- Using savings before you start Social Security
- Tapping home equity
- Reducing spending
- Securing a full- or part-time retirement job
7. There is No Outrunning Debt: You Need to Face It
You may think you don’t have to worry about debt in retirement, but that is not necessarily so. A 2017 survey by American Financing found that 44% of retirees still carried a mortgage. And, the number of people over 60 with credit card, medical, and student debt is rising.
Debt is not always terrible, but if you don’t have a plan for taking care of it, it can cripple your finances and the effects only worsen with time.
This short and entertaining horror film shows how debt triggers the same emotional and psychological terror as any other movie villain.
Use the NewRetirement Planner to try what if scenarios with your debt. See what happens to your future net worth if you pay a little more each month. What is the result if you consolidate debt into a lower interest rate?
I didn’t even try to make a eerie headline for this fact. The statistic is scary enough on its own. One out of four U.S. workers have zero savings. That means that they can’t address a financial event, let alone prepare for a secure retirement.
And, if people have savings, they don’t have nearly enough. Thirty percent of Americans between the ages of 55 and 67 have less than $10,000 in retirement savings, according to a recent survey from Sagewell Financial
According to Vanguard’s “How America Saves 2022” report, the median retirement balance for savers aged 55 to 64 is $89,716. As a reminder, the median is the midpoint value. In other words, half of that group has saved less than $89,716.
9. You Don’t Want to Get Retirement Wrong
According to Schroder’s Retirement Readniness Report, 20% of those already retired are struggling financially.
This indicates that at least one out of five people get their retirement plan wrong and once retired, you have fewer options for improving your financial situation.
Building a detailed financial plan before you retire and developing good financial habits is key to a healthy, happy and wealthy-enough future. (Let us help you. Get started with the NewRetirement Planner.)
10. Your Health is Precious and Pricey to Maintain
American retirees might assume that Medicare will cover all their medical costs. But that is not true. And, these costs usually rise at a rate that is higher than general inflation.
In fact, an average retired couple who is both age 65 and retired in 2022 might need an estimated $315,000 in retirement funds to cover medical bills during retirement, according to research from Fidelity Investments.
Get a personalized lifetime estimate of your out of pocket healthcare costs (and assess a plan for covering a long term care need) with the NewRetirement Planner.
11. Medicare and Social Security Are in Trouble
It is really bad in a horror movie when the rescuers are sabotaged. It almost makes you give up hope for the hero. And, that is kind of the situation with Medicare and Social Security.
The money being brought into Social Security through payroll will soon not be enough to cover the benefits being paid out. And, the deficits in the program may cause benefits to be cut.
Almost three in four workers (73%) agree with the statement, “I am concerned that when I am ready to retire, Social Security will not be there for me,” including 32 percent who “strongly agree” and 41% who “somewhat agree.” Concerns about the future of Social Security vary by employment status: Full-time workers are significantly more likely to be concerned, compared with part-time workers.
Learn more about the troubles facing Medicare and Social Security…
The really terrifying gotchas in a scary movie don’t come from the things that you know are out to get you, they come from complete surprises.
With financial planning, it is not the devil you know, it is the one you don’t know. That is why it is a good idea to plan for what you know might go wrong and always always have emergency cash in place to cover whatever surprises lurk in your future. However, only 25% of Americans have savings of any kind that are adequate to cover 6 months of income.
You don’t have to plan your financial future alone, nor should you. Financial intelligence is low in the United States across all demographics and getting expert guidance or a second opinion is advisable.
Here are 3 resources offered by NewRetirement to help you get the lights on with your finances:
The NewRetirement Planner: This powerful tool can guide you step by step to more wealth and security. Gain confidence that you can afford the life you want by taking control over your financial plan.
NewRetirement Advisors: NewRetirement Advisors offers you fee-only access to a CERTIFIED FINANCIAL PLANNER™. Get advice and collaborate with an advisor who has taken a fiduciary oath and specializes in retirement to: Set up a free discovery session with NewRetirement Advisors.
NewRetirement Classroom: NewRetirement offers Introductory and In Depth classes to help you make the most of your money and time.