The retirement landscape is changing dramatically. The vision of the “golden years” has given way to worries about retirement security for many Americans – worries that are well-founded.
The National Institute of Retirement Security released a report in 2013 on how prepared we are for retirement. “The Retirement Savings Crisis: Is it Worse Than We Think?” states that nearly 45 percent of all working-age households do not own assets in a retirement account; that’s about 38 million people. The typical American family has only “a few thousand dollars” saved for retirement and the median savings for people who are 10 years away from retirement is $12,000. One-third of people ages 55-64 haven’t saved anything for retirement.
Are you one of these people?
According to the U.S. Department of Labor, fewer than half of Americans have calculated how much they need to save for retirement, and in 2009, 13 percent of private industry workers with access to a defined contribution plan, such as a 401(k) plan, did not participate. The National Retirement Risk Index, which measures the percentage of working-age households that are at risk of not being able to retain their pre-retirement standard of living in retirement, found that 53 percent of households are “at risk.” The percentage of “at-risk” households increases when health care expenses are added into the equation. Many people falsely assume that Medicare will cover all of their health care expenses, but this is simply not true.
A survey by the Transamerica Center for Retirement Studies found that 64 percent of workers are not confident about their retirement security and 42 percent expect to work past the traditional retirement age of 65. Even so, more than one-third of workers in their 50s and 27 percent of workers in their 60s do not have any kind of retirement plan.
In addition, Transamerica Center for Retirement Studies reported that more than 21 million American workers expect to rely primarily on Social Security for their retirement income. This is a poor strategy, considering that the average monthly Social Security benefit in 2013 was only $1,269. The actual benefit is less for lower-wage workers who contributed less over their lifetimes and less for those who elect to initiate Social Security benefits before their defined retirement age.
Uncertainties related to the Social Security system exacerbate the issue. The Social Security Administration reports that there are currently 2.8 workers for each Social Security beneficiary, with that number expected to drop to 2.1 workers by 2033. Proposed solutions could result in reduced benefits for retirees, along with increased worker contributions.
The changing financial landscape, coupled with a longer life span, inadequate planning and the unknowns related to the Social Security system may jeopardize the golden years. However, there are strategies that can improve one’s retirement prospects:
Contact the Social Security Administration before making the decision to retire. The website www.ssa.gov has numerous tools to help you calculate your life expectancy, retirement income needs and benefits.
Sometimes health problems force people to retire early. If you cannot work because of health problems, consider applying for Social Security disability benefits.
Be sure to sign up for Medicare before the age of 65, if you plan to delay your retirement. Failure to do so could result in increased fees.
The National Council on Aging developed a free resource tool for setting financial goals, cutting costs, reducing debt and saving.
In addition, the Economic Check-Up tool can be accessed at www.benefitscheckup.org/esi-home.
Working longer may have added physical and mental health benefits. One recent study, “Work Longer, Live Healthier: The Relationship Between Economic Activity, Health And Government Policy,” found a correlation between early retirement and deteriorating health. While there are many individual factors that affect overall health, and the scientific community is not all in agreement with the conclusions of the study, it is widely accepted that staying actively engaged physically, cognitively and socially has positive health outcomes.
A final note for seniors already living on a limited retirement income. The National Council on Aging has an additional resource to help you locate resources to help pay for medicine and food.
Visit the Benefits Check-Up at www.benefitscheckup.org to access that resource.
Rochelle Sherlock, M.A., is consultant to the Senior Coalition of Solano County, an advisory board to Solano County’s Board of Supervisors.