The new retirement age is 70 — at least for almost half of Americans, says a recent study. And it’s because they don’t know how much they’ll need to save.
Fifty-five percent plan for Social Security to be their main income source, according to insurance company Nationwide. But 63 percent say they don’t understand how it works.
In this roundup, we go over retirement planning: from men postponing retirement more than women, to more working Americans taking interest in retirement income plans like pensions.
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A quarter (24 percent) of Americans are unsure how much they need to save for retirement. And a minority think it’s the amount that AARP recommends. For a comfortable retirement, the group, which advocates for seniors, says to save $1 million to $1.5 million for retirement. That is to pay for housing, food, healthcare and all life’s necessities for the rest of your life.
But according to CareerBuilder, American workers think they’ll need this much to retire…
- Less than $500,000: 20 percent
- $500,000-$1 million: 31 percent
- $1 million-$2 million: 14 percent
- $2 million-$3 million: 5 percent
- $3 million or more: 7 percent
And people are living longer, which could be causing the confusion. AARP says the average 65-year-old couple has a 43 percent chance of living to 95.
“Postponing retirement will make an impact across all of our country’s workforce, along with retirement policy and financial and healthcare planning,” says Rosemary Haefner, chief human resources officer at CareerBuilder. “With workers staying in their jobs longer, employers are adjusting hiring needs, but also reaping the benefits of the extra skills and mentoring abilities of mature employees.”
A quarter (23 percent) of workers 55 and older do not have a work-sponsored 401(k) plan to save for retirement. So how are they saving for retirement?
Most will turn to Social Security. As already pointed out, more than half will rely on it, while only 18 percent have a pension to fall back on.
One in four (26 percent) think they can live comfortably off Social Security alone, says Nationwide’s survey. Meanwhile, 27 percent of already retired U.S. adults say Social Security pays them less than they had expected. That will be a rude awakening for those future retirees.
Future retirees expect to make $1, 628 on average monthly. But, current retirees only earn $1,257, according to Nationwide. That’s 30 percent less than what they expect to earn.
“It’s problematic that so many people are planning to rely solely on Social Security for income in retirement,” says Tina Ambrozy, president of sales and distribution at Nationwide. “There’s a major disconnect between what consumers think their Social Security benefit will be – and cover – compared to reality.”
Now just because many are going to rely on it, doesn’t mean many aren’t concerned that it’s depleting. A third of future retirees plan to draw from their Social Security early because they don’t believe it will be available when they reach retirement age, says Nationwide. That could mean even lower benefits than expected.
So how can future retirees better plan for their golden years without needing to delay retirement?
Steady retirement income
Three-fourths of current retirees feel confident they and their spouse will have enough money to live comfortably in retirement, says a study from retirement planning company Principal. But it’s one thing to feel confident, and another to actually have enough saved for a full and comfortable retirement.
That confidence jumps to 89 percent for retirees with a defined benefit plan like a pension. That’s compared to only 59 percent of those who do not have one.
Sixty-seven percents of those currently retired plan to use Social Security as a major source of retirement income. But only 36 percent of those still working say the same.
“The picture continues to change for people already in retirement compared to those who are still working,” says Sara Wiener, assistant VP of retirement at Principal. “Younger generations face concerns about Social Security and fewer have access to a defined benefit plan than previous generations, leaving a big gap to fill as Americans approach retirement.”
A guaranteed retirement income has been a work benefit that many Americans have wanted lately, according to recent Debt.com reporting. The vast majority of current workers think a pension plan is important in choosing to accept a job.
Eighty-two percent of millennials say so, while 81 percent of Gen Xers and 74 percent of baby boomers agree, says a study from staffing firm Accenture.
“The pension benefit may now be nearly as important to employees as their healthcare,” says Owen Davies, who leads Accenture’s global pension practice. “While health benefits have been the benefit most valued by job seekers and employees in recent years, pensions appear to be closing the gap.”