Financial Planning for Retirement: Why You Should Maybe Jump on In and Retire
Most Americans facing retirement today say they are not confidently prepared for financing their golden years. But a new study finds retirement maybe more comfortable than pre retirees think it will be.
The outlook from those already retired is positive. According to a survey of 401(k) and IRA contributors conducted by global investment management company T. Rowe Price, those who are already in retirement tend to be more positive about their outlook versus those who are still in the workforce but with retirement in sight.
“While we know there are people with little or no retirement savings, our survey suggests that many who participated in a 401(k) are entering retirement with considerable assets,” sad Anne Coveney, senior manager of Thought Leadership at T. Rowe Price. “And new retirees are flexible with their spending and report high satisfaction with their retirement so far.”
Among the 1,000-plus working people ages 50 and over and more than 1,500 retirees surveyed by T. Rowe Price, here are some of the top concerns of these pre-retirees facing retirement and the reality of what people already retired have to say.
Reduced standard of living
- Forty nine percent of workers believe they will have to reduce their standard of living in retirement while only 35% of those who are retired already feel that they have reduced their quality of life
- Only 33% of pre retirees believe that they will live as well or better in retirement as they do now. However, 57% of retirees say that they are living as well or better in retirement than they did when working.
Working part time after retirement
- Fifty seven percent of people still working believe that they will work part time after retirement. However, only 29% of retirees are working or plan to work.
- Forty nine percent of pre retirees worry that they won’t have enough money to pay for healthcare while a whopping 70% of retired survey respondents are finding that they do have enough money for health expenses.
Leaving a Legacy
- Twenty eight percent of pre retirees believe they will be able to leave money to family members or charities. However, a full 50% of those already retired believe that they will be able to do so.
Combating Retirement Concerns
While the T. Rowe price study found that among those who have contributed to 401(k)s and IRAs, fears about retirement improve substantially once the retirement transition has taken place, retirement planning is still of paramount importance.
Here are a few tips for finding the confidence to retire:
Have Savings: It is important to note again that these survey results reflect the feelings of people who have retirement savings plans. If you don’t have savings or are worried that you don’t have enough. It is never too late. Start saving now.
Have a plan: While the reality is that your retirement will work itself out one way or another, creating a plan will make you more comfortable. And the more detailed that plan the better. Creating a budget, building retirement income streams (Social Security, annuities, retirement jobs), identifying your retirement savings withdrawal strategy, visualizing what will happen if you require long term care are important to your peace of mind in retirement.
A study by Natixis Global Asset Management found among its retirement account contributors, most were not taking an active role in their own financial planning. “We need to move from participation to engagement,” said Ed Farrington, Nataxis executive vice president, during a recent webinar. “Engagement remains low…. People value the plan, but when it comes to thinking about income, they are not using the tools available to them.”
Work with a professional: Creating a retirement plan on your own is great. But working with a retirement advisor can strengthen your confidence. Your retirement plan is not something that you can afford to get wrong.
“As with any journey, if you have someone who knows the way you have a higher likelihood for success than if you hope for the best,” Farrington said. “Become more engaged in your plan at work and seek advice where you have a shortfall of that in your experience.”