Lessons From Today’s Retirees with Matt Bell

May 21, 2024

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Are you confident you’ll be able to retire comfortably someday? Are you taking steps to make that happen?

Inadequate savings, faulty assumptions, and high inflation could create barriers to a comfortable retirement. Can we learn anything from today’s retirees? Matt Bell thinks we can and joins us today to discuss this.

Matt Bell is the Managing Editor at Sound Mind Investing, an underwriter of Faith & Finance.

What does the latest Employee Benefit Research Institute data show about how people feel about their retirement prospects?

In the latest report, nearly 70% of people in the workforce, and somewhat higher numbers of those who are retired, say they feel at least somewhat confident they’ll have enough money to live comfortably throughout retirement.

Not surprisingly, one of the top retirement-related concerns among both groups centers on inflation. Today’s workers say higher prices make it harder to save for later years. Another concern for both groups is the possibility that the government may change the American retirement system.

What lessons can workers learn from this survey?

What stands out are several areas of disconnect between worker optimism and their preparedness or between worker expectations and retiree experiences.

For example, while many people in the workforce are confident about how well their finances will hold up in retirement, many of today’s oldest workers—43 % of those age 55 or older—have less than $100,000 saved for retirement.

While we can’t control how the stock market performs, many of us have some control over how much we’re setting aside for retirement.

Another area of disconnect is that many of today’s workers say they intend to work past the traditional retirement age of 65. Yet, just 19% of today’s retirees actually retire that late.

It’s essential for all of us working to see that many of today’s retirees stepped out of the workforce earlier than they had intended. And while some did so simply because they could afford to, most in that situation had to retire because of health issues or changes at work.

On a related note, large numbers of today’s workers—75% are counting on being able to work for pay to some degree in retirement, whereas just 30% of today’s retirees can.

What are the takeaways from those two areas of disconnect?

They both have to do with setting realistic expectations. You don’t want to create a retirement plan based on an absolute best-case scenario. The ideal scenario is to build a strategy where those things will be helpful if they work out, but they’re not absolutely necessary.

What else stood out from this study?

It’s beneficial to run the numbers on retirement. That means using a retirement calculator to estimate how much money you’ll need in retirement and how much you should be investing now to achieve that goal. Surprisingly, only half of today’s workers have taken that step. But those who have run the numbers tend to begin saving more, which makes sense. The more real we can make retirement—the more we can see what we need to do to retire successfully—the more likely we are to take the steps we need to take.

What should future retirees know about Social Security?

For starters, it would be helpful to determine how much they’re likely to receive in benefits. Social Security will be an essential source of income for most of today’s workers in retirement. However, fewer than half know what their benefits will amount to at their planned retirement age, and less than 60% have thought about how the age at which they claim benefits will impact the amount they receive.

All this information is available on the Social Security Administration’s website, SSA.gov, or your Social Security statements.

What did the survey show about that debt in retirement?

In last year’s survey, nearly two-thirds of workers acknowledged that debt is a problem for them, and that issue is not likely to have disappeared between the previous year and this year.

While last year’s survey didn’t break debt down into specific types, other surveys have pointed to an increase in the number of people bringing a mortgage into their later years and how that hinders their financial freedom. As we’ve recommended before, it’s wise to plan to retire your mortgage by the time you retire. And, if rates ever go down again and you decide to refinance, be careful not to reset the 30-year payoff clock to a date past your intended retirement age.

On Today’s Program, Rob Answers Listener Questions:

I have a question about comparing the TSP and a Roth IRA. Are there differences in how you can use the money when you can take it out, or anything?
I have a long-term care plan for myself, but I do not have one for my husband. So if I had to put him in a nursing home, are they going to take away all of our land and our property?

Resources Mentioned:

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