AARP survey: 61% worried about expenses during retirement
By Liam Gibson
Wealth of Geeks
A new AARP survey finds that 20% of adults aged 50 and above have no retirement savings, and more than half (61%) are worried they will not have enough money to support themselves once they stop working.
High living costs, astronomical public debt, and chronic unpreparedness have eroded the foundations of retirement for years. Now, people’s faith in their post-work futures is dwindling, too.
More than one-third (37%) appear worried about basic expenses, such as food and housing, while seven in 10 (70%) express concerns about prices rising faster than their income.
BlackRock Chairman Larry Fink recently declared America in a full-blown retirement crisis. He named it one of the “mid-21st Century’s biggest economic challenges.” This bleak view goes well beyond Wall Street. Main Street folks are feeling it, too.
In a recent NIRS survey of working-age Americans, almost four-fifths (79%) agree the United States is in a retirement savings crisis, up from just 67% in 2020.
While there is growing consensus that the nation has a problem, there must be more certainty on what the average worker should do to optimize their position. Financial advisors offer insights into tackling chronic unpreparedness and how to tailor retirement planning based on one’s unique circumstances.
Better late than never
Reaching midlife without retirement savings is a distressingly common scenario. It is less a result of financial negligence or ignorance as much as simple misfortune. Catastrophic events like chronic illness, business failure, or long-term unemployment often break a well-grown nest egg. For those dealt a bad hand, life circumstances impede their ability to prepare for their post-work financial future.
The savings marathon may seem endless, but it’s a race that experienced financial advisors assure consumers they can win.
“For those rapidly approaching the ‘retiree cliff’ with no savings, it’s never too late to start, but urgent action is needed,” says Jorey Bernstein, CEO of Bernstein Investment Consultants. “Even small contributions can make a difference over time.”
Inflationary fears
Among those who have saved enough, concerns that enough may not be enough still linger.
Due to changing economic circumstances, reaching adequate retirement is trying to hit a moving goal. Among the clear majority of those over 50 who worry prices are rising faster than their income, many worry they will run out.
“The fear of rising prices outpacing income is valid, especially for those on fixed incomes,” says Bernstein. “Cutting expenses and considering relocating to lower-cost areas can help mitigate this risk. However, these strategies have limitations, and maintaining a diversified investment portfolio that keeps pace with inflation is crucial.”
Brian Sokolowski, managing partner and CIO of Bluebird Wealth Management, concurs that inflation and longevity risk scare many retirees. Yet he urges fearful clients to question their investment assumptions.
“We have found that many retirees view their date of retirement as an end date to their investment plan,” Sokolowski says. “We counsel our clients to view retirement as the beginning of liquidity needs on their retirement assets, but that their investing time horizon stretches out further to their life expectancy.”
“This view allows for meaningful inclusion of equities remaining in their portfolios — client risk tolerance and circumstances permitting — as equities are better inflation hedges than fixed income over long periods of time.”
Employer-sponsored funds are among the most reliable indicators of retirement readiness. AARP reports that Americans with workplace plan access are 15 times more likely to save for post-work life.
Experts suggest maxing out salary contributions to a 401(k) plan to fast-track retirement wealth with powerful employee benefits such as tax-deferred growth. Elective contributions and employer matches can also supercharge savings, though there are limits.
“Certainly, if you are a high-income earner and wish to continue the same lifestyle in retirement, the annual 401(k) maximum contribution is likely insufficient to maintain that same level of spending in retirement,” says Lisa Whitley, owner of MoneyByLisa.
“Individuals should aim to save at least 10-15% of their income, including employer contributions, for retirement,” says Bernstein. “Additional savings vehicles, such as IRAs or taxable accounts, can further bolster retirement readiness.”
Don’t go too far
Despite these retirement woes, saving too much for retirement can become counterintuitive.
“It is absolutely possible to over-save for retirement,” says Stephan Shipe, Ph.D., CFA and Lead Advisor at Scholar Financial Advising.
Unfortunately, we have worked with clients who didn’t have a good handle on the impact of their savings, especially once compound interest was working in full force, and ended up in a situation where they likely could’ve retired years earlier.”
While not ideal, over-saving has its perks and remains the lesser of two evils.
“Over-savers have more flexibility to spend more on their wants rather than only on their needs,” says Spiros Vassilakos, Private Wealth Advisor at Athenian Private Client Group.
“This would also give them an opportunity to give and leave more to their heirs and next generation.”
The retirement crisis is well underway, and for those who lack considerable net worth, healthy savings will be paramount for long-term success amid an uncertain future.
Many Americans must prepare for their post-work years. By prioritizing consistent savings and diversifying investments to hedge against inflation, workers give themselves their best chance to thrive in their golden years.
Wealth of Geeks
A new AARP survey finds that 20% of adults aged 50 and above have no retirement savings, and more than half (61%) are worried they will not have enough money to support themselves once they stop working.
High living costs, astronomical public debt, and chronic unpreparedness have eroded the foundations of retirement for years. Now, people’s faith in their post-work futures is dwindling, too.
More than one-third (37%) appear worried about basic expenses, such as food and housing, while seven in 10 (70%) express concerns about prices rising faster than their income.
BlackRock Chairman Larry Fink recently declared America in a full-blown retirement crisis. He named it one of the “mid-21st Century’s biggest economic challenges.” This bleak view goes well beyond Wall Street. Main Street folks are feeling it, too.
In a recent NIRS survey of working-age Americans, almost four-fifths (79%) agree the United States is in a retirement savings crisis, up from just 67% in 2020.
While there is growing consensus that the nation has a problem, there must be more certainty on what the average worker should do to optimize their position. Financial advisors offer insights into tackling chronic unpreparedness and how to tailor retirement planning based on one’s unique circumstances.
Better late than never
Reaching midlife without retirement savings is a distressingly common scenario. It is less a result of financial negligence or ignorance as much as simple misfortune. Catastrophic events like chronic illness, business failure, or long-term unemployment often break a well-grown nest egg. For those dealt a bad hand, life circumstances impede their ability to prepare for their post-work financial future.
The savings marathon may seem endless, but it’s a race that experienced financial advisors assure consumers they can win.
“For those rapidly approaching the ‘retiree cliff’ with no savings, it’s never too late to start, but urgent action is needed,” says Jorey Bernstein, CEO of Bernstein Investment Consultants. “Even small contributions can make a difference over time.”
Inflationary fears
Among those who have saved enough, concerns that enough may not be enough still linger.
Due to changing economic circumstances, reaching adequate retirement is trying to hit a moving goal. Among the clear majority of those over 50 who worry prices are rising faster than their income, many worry they will run out.
“The fear of rising prices outpacing income is valid, especially for those on fixed incomes,” says Bernstein. “Cutting expenses and considering relocating to lower-cost areas can help mitigate this risk. However, these strategies have limitations, and maintaining a diversified investment portfolio that keeps pace with inflation is crucial.”
Brian Sokolowski, managing partner and CIO of Bluebird Wealth Management, concurs that inflation and longevity risk scare many retirees. Yet he urges fearful clients to question their investment assumptions.
“We have found that many retirees view their date of retirement as an end date to their investment plan,” Sokolowski says. “We counsel our clients to view retirement as the beginning of liquidity needs on their retirement assets, but that their investing time horizon stretches out further to their life expectancy.”
“This view allows for meaningful inclusion of equities remaining in their portfolios — client risk tolerance and circumstances permitting — as equities are better inflation hedges than fixed income over long periods of time.”
Employer-sponsored funds are among the most reliable indicators of retirement readiness. AARP reports that Americans with workplace plan access are 15 times more likely to save for post-work life.
Experts suggest maxing out salary contributions to a 401(k) plan to fast-track retirement wealth with powerful employee benefits such as tax-deferred growth. Elective contributions and employer matches can also supercharge savings, though there are limits.
“Certainly, if you are a high-income earner and wish to continue the same lifestyle in retirement, the annual 401(k) maximum contribution is likely insufficient to maintain that same level of spending in retirement,” says Lisa Whitley, owner of MoneyByLisa.
“Individuals should aim to save at least 10-15% of their income, including employer contributions, for retirement,” says Bernstein. “Additional savings vehicles, such as IRAs or taxable accounts, can further bolster retirement readiness.”
Don’t go too far
Despite these retirement woes, saving too much for retirement can become counterintuitive.
“It is absolutely possible to over-save for retirement,” says Stephan Shipe, Ph.D., CFA and Lead Advisor at Scholar Financial Advising.
Unfortunately, we have worked with clients who didn’t have a good handle on the impact of their savings, especially once compound interest was working in full force, and ended up in a situation where they likely could’ve retired years earlier.”
While not ideal, over-saving has its perks and remains the lesser of two evils.
“Over-savers have more flexibility to spend more on their wants rather than only on their needs,” says Spiros Vassilakos, Private Wealth Advisor at Athenian Private Client Group.
“This would also give them an opportunity to give and leave more to their heirs and next generation.”
The retirement crisis is well underway, and for those who lack considerable net worth, healthy savings will be paramount for long-term success amid an uncertain future.
Many Americans must prepare for their post-work years. By prioritizing consistent savings and diversifying investments to hedge against inflation, workers give themselves their best chance to thrive in their golden years.
