What we can learn from retirees' regrets
Only about 35 percent of retirees feel they are prepared adequately for retirement, and 25 percent are worried they’ll outlive their savings.
Many American retirees have regrets about how they saved for retirement and are finding they are unable to maintain their pre-retirement standard of living. This has led many retirees to seek part-time jobs or accumulate additional debt to cover living expenses, along with tightening budgets and giving up luxuries, according to a new report from Clever.com.
$179,000
According to the report, “State of Retirement Finances: 2021 Edition,” retirees have saved only about 39 percent of what they are expected to need to fund their retirement. The survey, which polled 1,500 Americans about their retirement funds, debt and financial worries, found retirees on average have about $179,000 in retirement funds, far less than the $465,000 recommended by experts, said the report.
Less than $50,000
While 12 percent of retirees surveyed said they had more than $400,000 in retirement savings or retirement-related investments, 65 percent said they have less than $50,000, leaving many retirees dependent upon social security to make ends meet. Social security was the most common source of retirement income among those surveyed, a less-than-ideal dynamic as social security provides only about $1,514 per month for retirees who spend an average of $3,900 each month.
Overall, American retirees spend about $7,700 more than they bring in per year, according to the survey. As a result, retirees are living modestly and in many cases below their pre-retirement standard, and still falling behind, according to the study. About 60 percent of retirees said they struggle to pay for their expenses.
Medical bills
As a result, 16 percent of respondents work part-time or perform consulting work to make ends meeting during retirement. While some retirees chose to work for social interaction or because they enjoy their job, most retirees who work do so because their savings and social security are not enough to cover expenses, the report found.
Medical bills are the most difficult expense for retirees to cover, a situation that has been exacerbated by COVID-19, which disproportionately affects older people.
Other expenses that retirees struggle to pay include groceries, credit cards, mortgage or rent, insurance, debt repayment, car loans and student loans. As a result, American retirees doubled their average non-mortgage debt last year to $20,000, in many cases to try to cover these expenses. By comparison, non-retirees accumulated about $5,000 of additional debt last year, a smaller percentage than retirees.
Retiring earlier, but not by choice
While many retirees are delaying retirement for a variety of reasons, 60 percent of retirees surveyed reported that they retired earlier than expected, and not by choice. Sixty-five percent of those who retired early did so because of health issues, while 22 percent left the workforce before they planned to due to job loss and 10 percent to care for a family member. Only 3 percent were able to retire early due to having additional wealth.
“Forced early retirement can leave retirees in a tough spot financially, as they simultaneously lose out on time they planned to save for retirement and have longer retirements to cover expenses,” said the report. “That’s even more troubling for those who left the workforce due to illness, as they will have additional medical expenses to cover, as well.”
Waited too long to start saving
Most retirees surveyed said they have regrets about how they saved for retirement, with more than half saying they think they waited too long to start saving and about two-thirds saying they should have learned more about savings and investments while they were still working. Only about 35 percent of retirees feel they are prepared adequately for retirement, and 25 percent are worried they’ll outlive their savings.
Interestingly, 57 percent of non-retirees think they are saving enough for retirement, a belief that is backed up by statistics that show that, on average, pre-retirees are saving about 10 percent of their income for retirement, which is in line with recommendations. In addition, younger generations are beginning to save earlier than their older counterparts. Millennials started saving for retirement on average at age 23, compared with Gen X which started saving at around age 30 and baby boomers who started saving at age 40.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.
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