Here at the AgingOptions blog, we like to present common sense articles that answer questions most retirees are facing. In the case of this article recently published on the CNBC website, the question on the minds of many seniors is pretty straightforward: how can I make certain I don’t outlive my money?
Optimistic About Retirement but Not About Retirement Savings
“As the economy strengthens, more workers nearing retirement age are feeling better about their economic prospects,” CNBC reports. “That’s the good news.” However, the bad news is more ominous: Americans looking ahead to retirement are worried. Their big concern, according to the article, is their savings – or rather their lack of savings – and how long their money will last. A recent survey from Wells Fargo shines a spotlight on this good news/bad news view of the retirement future. The bank surveyed more than 2,500 adults last August, and among those still working, 85 percent expect retirement to be “a positive new chapter in life” – but 70 percent said they are worried about running out of money.
The CNBC article says most people are right to be worried. Surveys of all Americans, not just boomers, have recently shown that more than half have less than $1,000 in savings, and even baby boomers – the majority of whom are fast approaching retirement age if they’re not already there – are saving far too little for the future. One 2014 report from the Stanford Center on Longevity, quoted by CNBC, found that almost one-third of baby boomers – with an average age of 58 – had no money at all set aside in retirement plans. Among the two-thirds of boomers with retirement savings, the median balance was around $200,000.
Weak Retirement Savings Presents a “Dismal Situation”
“This situation for many retirees is dismal,” says Rajiv Nagaich of AgingOptions. “It goes to show how many people are in denial about planning ahead for retirement. They have their head in the sand!” He adds that far too few retirees are utilizing one of the most powerful financial planning tools available in retirement: a Retirement Dashboard. “We strongly urge our clients and radio listeners to sit down with a trusted professional – someone without a product to sell – and have them prepare a dashboard that does for your retirement what your dashboard does for your car. You can see at a glance how you’re doing financially and where you need to make adjustments.” According to Rajiv, “There’s no better way I know of for the average retiree to achieve financial peace of mind.” If you’ll contact us at AgingOptions, we’ll refer you to an adviser who can answer your questions about preparing and maintaining a personalized Retirement Dashboard for you.
CNBC advises that retirees need to plan for two major issues that many ignore: longer life expectancy and higher than anticipated health care costs. A survey from the Society of Actuaries found that, when asked how long a person of their age and gender should reasonably expect to live, over 40 percent of retirees guessed at least five years too low. “With that — and rising medical costs — comes surging projections of what retirees can expect to spend for retirement health costs,” CNBC reports. Fidelity Investments did a study which estimated that a healthy 65-year-old couple retiring this year will need $280,000 to cover their health-care costs. That figure is almost certain to keep rising, putting a secure retirement farther and farther out of reach for retirees who are unprepared.
Three Common Sense Tips to Boost Retirement Savings
The CNBC article arrives at what we think is a painfully obvious conclusion: today’s retirees are going to need more discretionary income. There are three basic sources for that income: increase savings (and, we would add, cut spending); keep working longer; and look for part-time income to supplement Social Security and savings.
- Increased Savings: This is tough for many people approaching retirement, we realize, but sometimes we have to take the tough road of self-discipline. CNBC quotes research from The Stanford Center that advises people to set aside between 10 and 17 percent of their income if they plan to retire at 65, a rate which is at least double the average savings rate for the average American. Financial planners say that you may need to downsize and reduce the support you’re giving to financially dependent adult children. A good financial planner should be able to advise you on ways to spend less and save more.
- Longer Work Life: “One of the best ways to catch up on retirement savings is to work longer,” says CNBC. The National Bureau of Economic Research reports that “delaying retirement for just three to six months has the same impact as saving 1 percent more of your salary over 30 years.” Working longer also “allows you to preserve your retirement savings and even keep building those assets in tax-advantaged retirement plans while reaping the benefits of delaying Social Security past full retirement age.”
- Supplemental Income: You need to find a “side gig,” CNBC “Whether by choice or necessity, nearly 3 out of 4 Americans already plan to work beyond traditional retirement age on at least a part-time basis, according to a recent Gallup poll.” Fortunately, as we’ve reported here on the AgingOptions blog, older workers are increasingly in demand thanks to a shrinking labor force. That extra income can make the difference between financial stress and relative comfort if you’re facing retirement with modest savings.
Make Certain Your Retirement Plan is Complete
We think the CNBC article makes some valid points. What’s missing, though, is a broader, more comprehensive approach to the problem. Retirement planning is about far more than money, which is why it’s essential that you look at your financial picture as just one piece of a puzzle. A well-rounded retirement plan must deal with money issues but also the other critical facets of retirement living: your housing plans, your legal protection, your medical coverage (both short and long-term) and communication with your family. These elements of a healthy retirement plan work together, as part of an interconnected and interdependent whole.
Fortunately, there’s one retirement planning strategy that does exactly that: a LifePlan from AgingOptions. And there’s an easy and enjoyable way to find out about LifePlanning, without cost or obligation, and that’s to join Rajiv Nagaich at a LifePlanning Seminar. They’re free, fun, and information-packed, and there’s probably one near you. Visit our Live Events page where you’ll find a complete calendar of upcoming seminars, along with a simple online registration form. Whether you’ve been preparing for retirement all your life or just started yesterday, you’ll find a trove of useful information at a LifePlanning Seminar, so we hope to see you at a live event soon. Age on!
(originally reported at www.cnbc.com)