According to TransAmerica’s recently-released report, Current State of Retirement – A Compendium of Findings About American Retirees, most American retirees are overconfident about their ability to sustain their lifestyles over their life spans. 72 percent of retirees surveyed are “somewhat” or “very confident that they will be able to maintain a comfortable lifestyle throughout their lives but only 46 percent say that they have enough savings to do so.
The current (median) savings level that retirees have in their various retirement accounts is $119,000. Married retirees have a median of $224,000 in retirement savings, while unmarried retirees have an average of $40,000.
The study also found that relatively few of today’s retirees have any kind of written financial plan for their retirement years. Over half of them say they have a retirement strategy in place, but only 10 percent of them have a retirement strategy in writing.
Only 30 percent of today’s retirees have a plan that takes into account the long-term effects of inflation, which can severely erode the purchasing power of a pension or other source of retirement income unless some level of inflation protection is built in. Only about 26 percent have an estate plan in place.
Here are some of TransAmerica’s other findings:
1) Social Security is still the foundation of retirement security for most people. Nearly nine out of ten retirees report Social Security benefits as a part of their overall retirement income plan.
2) Private savings and investments is the second most commonly cited retirement income source with 48 percent of current retirees receiving income, thanks to private savings. However, it’s disappointing that fewer than half of those surveyed, having reached the age of retirement, were able to cite private savings as a significant source of retirement income.
3) Only 42 percent of current retirees report taking income from employer-funded pension plans. This number will likely fall in future years since fewer and fewer employers have been offering them, preferring instead to offer lower-cost defined contribution plans to employees.
4) Most retirees report they retired sooner than they had planned to. Fully two thirds of retirees in their 60s and 53 percent of retirees in their 70s report that they had to retire prematurely. The reasons cited for early retirement are as follows:
- 66 percent cite employment-related reasons for early retirement, such as layoffs or job losses.
- 52 percent of retirees in their 50s report that they retired because of poor health.
- Only 12 percent of retirees who retired early report they had done so because they had earned enough money to provide a secure retirement lifestyle for themselves.
5) The median age at which they began taking Social Security benefits was surprisingly young – 62 years of age. This results in a significantly lower monthly benefit than waiting until one reaches full retirement age, although those who begin taking Social Security benefits as soon as they are eligible are able to collect benefits for more years.
6) Senior citizens have a significant exposure to the risk of long term care costs. According to the 2016 Genworth Cost of Care survey, a year in an assisted living facility costs an average of $43,539 per year, nationwide, while a semi-private room in a nursing home costs an average of $82,125.
While there are bright spots in the Transamerica report – today’s retirees are the healthiest with a longer life expectancy than any in history. Most retirees would be well served by getting a written plan in place that addresses a variety of risk, including living longer than expected, disability and the need for long-term care, inflation and market risk.