The Dream of Retirement
Not too long-ago Rhonda and I were chatting about putting in a barbeque and swimming pool in our backyard for our retirement. But before we could get too deep in the debate on whether we should have green or blue glass tile accents were stopped dead in our tracks with the question, “How are we going to afford this since we’re retired?”
Ouch!! I hate it when reality gets in the way of a good dream.
Most of us dream of the day we can finally say goodbye to the grind and hello to endless days of relaxation. We picture ourselves lounging on a beach, sipping on a piña colada, or maybe even taking up that hobby we never had time for. But for many Americans, that dream can quickly turn into a nightmare when they realize their savings are not enough to sustain them.
The Inconvenient Truth
So why are we falling short when it comes to retirement savings? Well, there are a few factors at play here. First and foremost, our generation is facing longer lifespans than previous generations. This is one of those good news/bad news situations. When Social Security was established in the 1930s, the average life expectancy at birth was 58 years for men and 62 years for women. Today, we are expected to hang around until we are 76 years old. While it’s wonderful that we are living longer (and hopefully also living healthier), our social safety net (Social Security) was only expected to last for about 13 years.
What’s more, the Employee Benefit Research Institute (EBRI) found that only 42% of Americans have tried to calculate how much money they’ll need in retirement. It’s no wonder so many of us are caught off guard! Secondly, many of us are living longer than previous generations, which means our savings need to last even longer. And with the rising costs of healthcare and housing, it’s becoming increasingly difficult for retirees to make ends meet.
The Harsh Reality of Retirement Savings
According to the Federal Reserve, the median retirement account balance for Americans is around $65,000. That’s right, just $65,000! And that’s including the value of their homes. For reference, the recommended amount needed for a comfortable retirement is often quoted as being between $1 million and $1.5 million. So, unless you have a secret stash of gold buried in your backyard, it’s safe to say that most of us are not on track for the retirement we imagined.
Longevity and Its Impact
Now, let’s talk about how long we’re expected to live after we hang up our work boots. According to the Social Security Administration, the average American man retires at 65 and lives until 84. Women, on the other hand, retire at 63 and live until around 86. That means we’re looking at roughly 20-21 years of retirement life.
But here’s the kicker—those with good health could live even longer. And while living longer is a blessing, it also means more years to finance without a steady income.
Tips for a Secure Retirement
The Transamerica Center for Retirement Studies reports that the average American’s retirement savings will last about 10 to 20 years. That’s only half the time many of us will spend in retirement. Yikes! So, what can we do to ensure our money lasts as long as we do?
- Start saving early and consistently.
- Maximize employer contributions to your retirement plan.
- Consider investing in stocks for higher returns over the long term.
- Make lifestyle adjustments now to save more later.
- Plan for potential healthcare
This shortfall means many Americans will run into financial trouble in their golden years, requiring them to cut back on expenses significantly or, worse yet, come out of retirement to rejoin the workforce.
The Struggle to Find Post-Retirement Jobs
Now, if you thought finding a job was tough in your 20s, imagine doing it at 65. The Bureau of Labor Statistics reveals that the unemployment rate for individuals aged 65 and older is twice that of those aged 25 to 34. And even when older adults do manage to secure a job, it’s often at a lower pay and with fewer benefits.
So, what can we do if we find ourselves in this situation?
Options for Supplemental Income
- Consider part-time work or consulting in your field of expertise.
- Look into freelance opportunities or side hustles.
- Explore your passions and hobbies, and see if you can monetize them.
- Rent out a spare room through Airbnb or similar platforms.
- Take advantage of the growing “gig economy” by offering services on sites like TaskRabbit or Upwork.
Additionally, research from the AARP Public Policy Institute shows that 58% of workers aged 50 and above have experienced age discrimination. This makes finding a job post-retirement not just challenging, but often downright discouraging.
The Mental Health Impact
Beyond the financial implications, there’s a significant mental health impact to consider. Many retirees experience a loss of identity and purpose once they stop working. The American Psychological Association (APA) notes that retirement can lead to feelings of depression and loneliness, especially for those who identified strongly with their careers.
For men, the risk is particularly high. A study published in the Journal of Epidemiology & Community Health found that men who retire early are 40% more likely to die within the first 5 years of retirement compared to those who continue working. Women also face mental health challenges but tend to fare slightly better, possibly due to stronger social networks and community ties.
Finding the Silver Lining
While these statistics might paint a bleak picture, there are steps you can take to make sure your retirement is as smooth as possible:
1. Start Saving Early. The earlier you start saving, the better off you’ll be. Compound interest is your best friend when it comes to growing your retirement fund.
2. Calculate Your Needs. Don’t be part of that 58% who haven’t calculated their retirement needs. Use online calculators, consult with a financial advisor, and get a clear picture of what you’ll need to live comfortably.
3. Diversify Your Investments. Don’t put all your eggs in one basket. Diversify your portfolio to reduce risk and increase potential returns. Consider stocks, bonds, real estate, and other investment vehicles.
4. Stay Healthy. Good health can lead to a better, longer life. Exercise, eat well, and get regular check-ups. Staying healthy can also lower medical expenses in retirement.
5. Stay Engaged. Even if you retire, try to stay engaged in activities that give you a sense of purpose. Volunteer, join clubs, or take up hobbies you’re passionate about. Staying mentally active can ward off depression and loneliness.
6. Consider Part-Time Work. If finances are tight, consider part-time work or consulting in your field. It’s a great way to stay active, make extra money, and ease the transition into full retirement.
If you’re concerned about your retirement plans, consider reaching out to a financial advisor who can help you create a personalized strategy. After all, a well-planned retirement is the best way to ensure you can enjoy those piña coladas on the beach, worry-free.
Here’s to a secure and fulfilling retirement!