One day as I was driving to my office, I was drawn to the odometer on my vehicle when I was notified of a service alert due to the fact that I had crossed a mileage threshold. My first thought was that I would "get to it another time" but as soon as I reached my desk, I decided to make it a priority and call the dealer to set up the necessary service for next week. While I can't say that I enjoy spending money on vehicle maintenance, I love my car and it is important to me that I do what I need to in order to keep it healthy for many Years to come.
Considering that my professional specialty is retirement preparation, the fact that my car had reached 10,000 miles was relevant to me because served as a reminder that there are 10,000 people a day turning age 65 in the United States. That number is projected to grow to 12,000 by 2024, so it is not surprising to know that 71% of consumers report that guaranteed lifetime income in addition to Social Security is highly valuable.1 Today, we are becoming increasingly more dependent upon our own savings to supplement other sources of retirement income, causing many of us to feel lost.
You see, longevity risk is quite real. In general, individuals are living longer, Social Security will only provide a portion of our needed income and employer sponsored pensions are becoming less common. The challenges that many of us face and the experience that we will have is likely to differ from that of our parents and grandparents. When FDR launched the Social Security fund in 1935, full benefits were available at age 65 but the average life expectancy was only 62.2
Will your retirement goals and dreams match your reality?
It might be helpful to gain insight from people you know who are currently retired. Was their retirement what they expected, or was it something else?
For more than 30 years, the Employee Benefit Research Institute (EBRI) has conducted the Retirement Confidence Survey, which gauges the views and attitudes of working-age and retired Americans regarding retirement and their preparations for retirement.3
Part of the survey takes a deep dive into workers' expectations for sources of income in retirement versus retirees' actual income sources.
Here are some highlights of the 2021 survey....
Only 33% of workers expect Social Security to be a significant source of retirement income. In reality, 62% of retirees say it's a major source.
Additionally, more than 50% of workers believe that workplace savings plans will be a significant source of retirement income. However, the 2021 survey found that workplace plans are a major source for only 20% of retirees. Here's another nugget to consider: 26% of workers plan to work for pay in retirement while in reality, only 7% of retirees actually do. These numbers are consistent year after year.
Would it surprise you to know that the number one financial concern of people planning for retirement is running out of income? 4 I am not surprised.
Mr. Rogers once said "often when you think you're at the end of something, you're at the beginning of something else." Plan ahead to ensure that you are prepared to start your new life with confidence. It is critical that your finances support your retirement vision so there are no surprises when it's your turn. Have you reviewed your retirement plans recently?
1. 2020 Guaranteed Lifetime Income Study - Greenwald Research & Cannex Guaranteed Lifetime Income Study - Greenwald Research
3. Employee Benefit Research Institute, 2021 Retirement Confidence Survey 2020 Retirement Confidence Survey Summary Report (ebri.org)
4. American Institute of Certified Public Accountants AICPA