For too many older Americans, the concept of an enjoyable and relaxing retirement seems to be slipping away. According to a recent survey, one-third of Americans aged fifty and above believe that they will outlive their savings. Approximately the same amount (34%) of older Americans who had not yet retired believes they are extremely or very financially prepared for their retirement. Many other older Americans are in the middle ground — somewhat prepared and confident, yet anxious about their retirement years.
Whether you are already retired or nearing that point, the survey shows significant anxiety about retirement finances within your age group.
The survey, funded by the Alfred P. Sloan Foundation and conducted by the AP-NORC Center for Public Affairs Research, shows that there is serious concern among respondents about how long retirement money will truly last and what expenses they may face in retirement. That is true even through most seniors report multiple sources of retirement income — 81% have two or more sources and 60% have three or more.
Unexpected medical expenses are one of the largest sources of expense concerns, with exactly half of respondents reporting anxiety about being able to pay them.
It should come as no surprise that older Americans with lower incomes are more anxious about retirement, but anxiety crosses the income lines. 58% of survey respondents with household incomes below $50,000 report anxiety about their retirement nest egg, but so do 40% of respondents with incomes greater than $100,000.
While there are concerns about retirement savings, it's not for lack of trying to save. Approximately 67% of older Americans that are still working are placing some of their paycheck aside for retirement — but as with anxiety, the responses shift with total income. An overwhelming majority (90%) of those with $100,000 or more in income are saving for retirement, while just under half (47%) of those earning below $50,000 are doing so.
Even with multiple sources of retirement income, Social Security plays an important role in many retirement plans. For 44% of those aged 50 or above, it is expected to be the largest component of income. A majority (54%) of respondents with incomes below $50,000 report that they will rely heavily on Social Security.
Unfortunately, 43% of respondents either plan to start receiving Social Security benefits before their full retirement age (FRA) or have already done so — reducing those critical benefits by anywhere from 6% to 30%. If they are having trouble getting by in the near-retirement years, seniors must make a critical decision. Do they struggle with little margin for error in the early years, or do they collect early and run the risk of outliving their funds? Given the number of early claims, it is no surprise many seniors expect to outlive their savings.
Income sources outside of Social Security are not bringing sufficient security, either. Only around 33% of seniors with retirement investments are very confident or extremely confident that their funds are being managed well — and that is during a prolonged bull market. The lack of confidence is approximately equal whether the accounts are self-managed or managed by others (professional or not).
Are you one of those anxious about retirement funds and expecting to outlive your savings? Feel better through taking action. It's never too late to trim expenses, divert more of your income toward savings, and invest your savings wisely in a suitably diverse portfolio. Proper planning and action now could prevent financial anxiety when you retire.
Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.