It used to be that a lot of people were confident they’d be able to retire comfortably one day. Funny thing was, even in those good old days, far fewer people were actually taking the necessary steps, like saving enough money.
Today, things have changed. More people are facing the fact that they’re behind on their retirement savings, and that’s changing their expectations.
According to a recent Gallup poll, a little over half (53 percent) of all workers believe they will not have enough money to retire comfortably—up from 32 percent who felt that way in 2002. And, according to a survey from the Employee Benefit Research Institute (EBRI), 33 percent of today’s workers expect to retire at age 70 or older—way higher than the 9 percent who thought they’d have to wait that long back in 1991.
Getting Financially Prepared to Retire
A good starting point to prepare for retirement is to calculate how much money you should be saving. According to the EBRI, just 42 percent of today’s workers have run the numbers on retirement. Interestingly, those who have expect to need more for their retirement than those who have haven’t, and they feel more confident about their ability to meet those needs.
Apparently, instead of being overwhelmed by a number that’s larger than expected, knowing their number motivates people to save more.
One of my favorite online retirement calculators is Fidelity’s myPlan Snapshot (click on “See how much you may need to save for retirement”). By plugging in just five numbers, you’ll see how much you’ll need and whether you’re on track. After getting your “snapshot,” you can get a more detailed estimate by clicking on “Create a plan.”
Getting Emotionally Prepared to Not Retire
The research about people pushing back their expected retirement date doesn’t say whether they’re happy about it. I’m going to take a wild guess and say probably not.
For the last 50 years or so, people have looked forward to retirement as a time of leisure. And if you’re working a job you hate, sleeping in every day probably sounds like a better alternative.
However, there’s a lot of evidence that when people stay engaged in work they find meaningful during their later years, it’s better for their relationships, their health, and their happiness.
So, it would be healthy for us to rethink retirement, maybe even retiring the idea altogether (sorry). We’ll probably need the money and the benefits that come from continued work, and we’ll be happier, assuming we find something worthwhile to do.
Still, there’s a danger in counting on a longer career to make up for any retirement savings shortfall. We may not be healthy enough to work for pay. That’s why we should do both: prepare emotionally to never retire, while preparing financially to retire at 70.
What are your retirement expectations?
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Makes sense. Thanks, Joe.
Until now we’ve been very heavy invested in stock, mostly S&P 500, riding out the ups and downs. I’m reallocating over time so the retirement mix will be closer to 60/40 (stock/bonds)
Joe – Sounds like you’re way ahead of most in the planning department. You doing anything complicated to get the 7.5%? Or just following the classic advice of getting the asset allocation right, etc?
I’m with ya on the Social Security comment. It’ll be nice if it’s there, but probably best not to count on it.
We are in good shape so far. With a target of 80% of our current income, we need 20X our income to withdraw 4%/yr and retire. We are at 13X right now. We need 54% growth to grow the 13 to 20. Along the way we save about 20%, so there’s 1 times income as a kicker.
The wildcard is the market return. 5 years of 10% would be great. 6 years of about 7.5% is my guess. In 6 years, the kid goes off to college and we re-evaluate our plans. I am betting that the day we hit 20X, we’ll calculate what it will take until we can spend foolishly in retirement, and work a few more years to get to that point.
You notice, I didn’t mention Social Security? I’d rather plan on zero and treat the check as found money, than to plan and not get what I counted on.