Retirement Reality Check: Are You Prepared for the Unexpected?
A recent survey by the Employee Benefits Research Institute reveals a concerning trend: retirees are reporting lower levels of well-being than they did just four years ago. In fact, only 48% of retired Americans between 62 and 75 say they’re very satisfied with life in retirement, a significant drop from 62% in 2020 and 53% in 2022.
The Weight of Inflation and Debt
Rampant inflation has taken a toll on retirees’ spending power, leaving many struggling to make ends meet. A staggering 68% of retirees report having outstanding credit card debt, up from 43% in 2020. This financial strain is likely a major contributor to their decreased satisfaction with life in retirement.
Planning Pitfalls
But inflation isn’t the only culprit. Many retirees are realizing they didn’t plan as well as they could have for their golden years. Half admit to saving less than needed, while one in three say they saved the right amount, and a mere 17% claim to have over-saved. As a result, a whopping four in 10 retirees rely on Social Security benefits for more than 80% of their retirement income – far exceeding the program’s intended goal of replacing just 40% of preretirement pay.
Key Moves for a Happy Retirement
So, how can you avoid getting caught off guard in retirement? According to Bridget Bearden, a research and development strategist at EBRI, preparation is key. Two highly correlated factors with satisfaction in retirement are participation in workplace retirement plans and job tenure.
The Power of Consistent Investing
Enrolling in a 401(k) or similar plan allows you to invest consistently and tax-advantageously over the long term, reaping the rewards of compounding interest and potentially earning “free money” through employer matching contributions. By doing so, you’ll be better equipped to accumulate assets and achieve a high standard of living in retirement.
Job Tenure: The Unsung Hero
Staying with a company longer and switching positions fewer times can also lead to greater assets. However, job-hoppers often cash out old workplace retirement plans or start anew at a lower default contribution rate, hindering their progress.
The Importance of Professional Guidance
Having a financial advisor can make a significant difference in retirement satisfaction. Those who engage a planner are more likely to have a plan in place, accounting for life’s twists and turns, and can spend more comfortably knowing they’ve prepared for the unexpected.
Budgeting: The Missing Piece
Unfortunately, fewer retirees are using budgets, leading to an uptick in credit card debt. Without a plan, it’s easy to overspend and risk depleting your savings. By prioritizing preparation, consistent investing, and professional guidance, you can set yourself up for a happier, more fulfilling retirement.
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