Confidence in Comfortable Retirement Dips Among Pre-Retirees

Something else from that report worth noting - I call it expectations vs. reality.

79% of pre-retirees planned to work in retirement, but only 29% actually did. And, 48% of the people in the survey ended up retiring earlier than planned - and not because they won the lottery or received a big inheritance....

I like this report because it not only shows what people are thinking/planning, but it follows them to see what actually DID happened. It's sobering, but important to know.

Jan Cullinane, author, The Single Woman's Guide to Retirement (AARP/Wiley)

Very well stated Jan... I got layed off at the age of 58 and had to move in with mother who needed 24 hr care. So this month was the start of receiving SS at 62. The difference amounted to losing $70 per month by not waiting. WE need ed the money now so glad to be receiving it. My husband and I wouldn't be able to retire somewhat comfortably without receiving our inheritance from our parents . Alot of lower income people just can't save for their retirement, so they most probably will need to depend on assistance from the govt...

I freak out every time I read the articles about how much money people need for retirement. Have $1M and no debt? Still not enough!!! Now we need $2M, accordingly to a few recent articles I've read in financial magazines. I don't know who writes financial articles, but many of them are completely unrealistic. I'd like to see articles about the finances of real retirees around the country.

Sharon, seems everyone has an opinion or has done a study on everything known to man. Eggs are bad, eggs are good, coffee is bad, coffee is good, wine is bad, wine is good. I for one went against the theory that it is good to wait to take Social Security at Full Retirement Age. My Hub and I decided to retire early at 63 and 62 1/2 respectively. We are able to enjoy life now. Our investments are growing because we are using SS money to supplement our income. Our house is paid off and we are not in debt. We are frugal but yet we buy whatever we need. People need to make sensible decisions once retired. Yes, I would like to remodel my home, take exotic vacations, put in a swimming pool, buy some fancy jewelry but that isn't happening. I do need to have new kitchen flooring installed due to age. We have two cars, one is a 2006 and the other a 2009. We will make them last as long as possible. I saw a new 2018 Honda CRV the other day and Oh...the temptation to buy that car! Some people in retirement need to be cautious and others will have more money than they need. Some people believe in the 4% withdrawal rate of savings per year during retirement. I might be more cautious. Each of our situations are different and we have to approach retirement in ways that work for us and not our neighbor.

Sharon, I was in the very same boat as you. No matter how much money we saved for retirement the financial "experts" warned it wasn't enough by half. The process was extremely discouraging. I finally took pen to paper (well, fingers to calculator) to see for myself.

I noted all expenses, rounded them up, then added extras like some travel, gifts, parties, car repairs, etc. On the income side I divided our retirement savings by 30 (figuring we'd need it for 30 years), then divided the quotient by 12 to see what we'd be able to draw monthly. I figured zero growth and ignored our home equity. I added that monthly draw from savings to our expected SS checks and compared it to our expected monthly expenses.

Guess what? We had enough!!!

Do we have a million dollar stash? Hardly! The difference between my numbers and those of financial wizards was astounding. Ah-haa moment: when things don't add up, the best way to unravel the truth is to follow the money. Most of these sites are sponsored by financial services corporations. These so-called experts have plenty of skin in the "do you have enough money saved for retirement" game. Namely, they're hunting for customers to invest retirement dollars so they can earn commissions and fees. So they instill fear. Fear of being unable to afford food, medicine, peace of mind, and the worst of all, fear of becoming financially dependent on our children.

On an aside - while crunching numbers I realized that two SS checks are crucial to my household. If one dies very early, the survivor's expenses will decrease some, but not enough to offset the loss of SS income, forcing the sale of our house. To compensate, we took out term life insurance policies to shore up the difference. (I've never seen this strategy mentioned on retirement websites and cannot fathom why - it seems fairly obvious to me. Granted, both DH & I are in excellent health so life insurance policy costs weren't sky-high.)

In summary, if I had been surveyed when only looking at retirement website calculators, I would have reported being Not At All Confident. After working the numbers my responses would have been Somewhat Confident. Now that we're in retirement? Very Confident.

One other factor that calculators miss... our generation was raised by Depression parents. We learned how to make a dime stand on end, and most of us used those lessons during life's lean years. If I find myself again needing to cut expenses to the bone, I am Very Confident that I can and will find a way to do so.

JCarol, We did a lot of the calculations you describe too and came up with a similar conclusion. However, we did not figure on Term Life Insurance. Can you elaborate on what insurance company you went with and how did you figure out how much insurance to take to fill the void if one should die and the loss of the one SS check?

For instance if one person was receiving a $1,000 SS check per month/$12,000 a year and passed 10 years into your 30 calculation you would still have a 20 years span missing that check and that would be $240,000. Most term insurance ads I have seen give examples up to $100,000.

Before I retired, I took out a term life policy because we still had a son at an expensive private university and two home loans. I knew we would be set long-term but until we eliminated the college expenses and paid off our primary residence, there was considerable financial exposure. I have additional life insurance also but I wanted to make sure that the home loans were paid off so my wife wouldn't have to worry about it.

I used an online service to compare rates. I think I used Einsurance but there are several of these firms that compare rates for you. I bought a 10-year $500,000 term policy, We will pay off our home loan in 6 months and no longer have anyone in college so I'll probably cancel the policy next year. I was about age 65 when I bought the policy and in good health. It costs me around $1800 a year. It was well worth the peace of mind during the time we needed it.

The constant "upping" of the amount needed to retire has caught my eye in the last few years. When we sat down with a financial planner we were surprised that we have a 98‰ chance to retire successfully! Nope don't have a million in savings but looking at all factors especially how we live and spend money.
Going against current thinking we will take our SS as soon as possible.. Life insurance in place especially since the beneficiary is not taxed on that money when collected. Our financial planner served to confirm our budget scratched out on the back of the social security benefits print out. We also printed out the previous 2 years credit card statement... Best info from that as to how we really live. Also we take our FP evaluation with a grain of salt as well.... We have left wiggle room.

I got a chuckle out of this. It reminds me of the surveys we would do to sell an idea that had no basis in reality, and extrapolate a select number of data to make it to appear to actually apply to all. For example, we tried to to tell the public there was no dangers in toxic locations by concentrating on individuals who were already healthy.

If you read the actual article in its original source, with the unique caveat used, you will read that this particular survey stated:

"Methodology Note: This year, the RCS utilized GfK’s national, probability-based, online KnowledgePanel® in lieu of
the traditional, random-digit-dial landline telephone and cellphone supplement used in prior waves. To examine the
impact of methodological change, a small phone survey was conducted for comparison."

So, no one was asked the questions across the board. But they already had the answers. It is very magical.

Louise - we figured out how much less the living expenses would be for one person rather than two (one car to insure and maintain, one cell phone, lower medical, entertainment and travel costs, etc.) We added up the reduction in costs and subtracted that total from the lower SS payment. The difference is the shortfall. It came to $10K per year. So we bought two $250K insurance policies. One each.

We went through SelectQuote and ended up using two different insurance companies to get the best rates. Combined cost is $2400 per year; rates are guaranteed for ten years.

We have a large paid-off house that we may downsize from within the next ten years (no immediate plans, but who knows?), so profits from our current home sale versus a smaller one could cover that $250K, making life insurance unnecessary.

It would be devastating enough for DH or I to lose the other. A life insurance policy that eliminates financial stress and prevents immediate pressure to sell our family home is a final gift we can offer each other.

JCarol, Very well thought out plan! Thank you for sharing with us. I have jotted down some of the finer points you mentioned for future reference. Wishing you a long, worry free retirement!

Don't forget about the staggering costs of long term care...make sure to include increased medical costs (as we age) in your prospective retirement budgets. Current average cost of a nursing home is $6965 per month for one person, in home health care is $2730 per month for one person - these costs increased 3.63% since 2011,and are likely to continue to go up. Don't assume you will be physically able to care for your spouse at home by yourself. 40% of those who reach 65 will need long term care in their lifetime, and the average stay in assisted living is 28 months, though 10% of us will stay five years in a nursing home. These costs are not covered by Medicare. Think about getting a Long Term Care insurance policy.

Louise - one other thought on the insurance piece. You can get life policies that are "first to die" such that they cover either you or your spouse based on which one dies first. With that type of policy, both of you are covered but it usually saves you some money versus having two separate policies. The downside of course is that there is no payment when the second spouse dies so your kids/heirs don't get any benefits but if that isn't a concern then a joint policy is cheaper.

Chris, you are absolutely right on long term care in a nursing home, however, here in CT nursing costs are even more horrendous. My Mom was in one and it was $12,000 a month for one person in a semi private room.That was in 2013 so I am sure the costs have gone up since then. The room was small and crowded, nothing luxurious at all for that amount of money.

My aunt in TN is in a nursing home and the cost is around $6,000 a month.

I have a long term policy for hub and I but it only covers around $6,000 a month for two years of care.

John, thanks, never heard of 'first to die' policies. Would work good for us as we have no heirs or children.

John - thanks for the tip. We don't need life insurance to bulk up what we leave to our kids - it's about giving financial breathing room to the surviving spouse. I'd never heard of this kind of insurance before and will investigate it before renewing our policy in 2018.

On another subject, but I don't know where to put this comment so I'll add it to a couple of the most recent threads, so please forgive me for hijacking this thread.

I would very much like to find a very ACTIVE retirement forum where members exchange thoughts and information. Yes, TopRetirements has one but it's disappointingly quiet (no offense, TR, but you know what I'm saying is accurate). Responses to blog topics seem to be the only place that garners comments, but as soon as a new blog topic is introduced the responses to previous topics die down almost immediately.

Can anyone recommend an active retirement forum - or do I have to figure out how to start one myself? Does anyone else have interest in such a forum?

Thanks in advance!

YES, JCarol, I would be very interested! I do wish TR could encourage more members to speak up! It would be more LIVELY and interesting! Don't forget too, many times comments are removed (censored) for whatever reasons. I don't know of any other retirement forums.

Note from Admin: Hear hear - yes, we would love it if more people at Topretirements would speak up! The ones that do (thank you!) are great, we just more people to contribute. Regarding comments removed, we only remove (or more often, move) them for 2 reasons:
- They violate our site rules (too mean, too political)
- Or, they are off topic. In which case we move them to a topic where they fit better. Nothing kills an interesting topic faster than someone chiming in on a completely un-related topic.

Of course sometimes the conversation slides into a new direction gradually, and that makes it harder. But the effect is the same - end of active chat! Thanks

JCarol: We would love for you to start a Forum on retirement thoughts and information. To help you get started, here is the link where you can pick a category and a new topic and ask a specific question about retirement to get things started, and post comments to keep it going.
https://www.topretirements.com/Forum.html

Hi Jane,
Unfortunately, TR's forum is not a vibrant community. I wish it were, but it's not. I was asking if anyone knows of a site with a robust retirement forum.

Love TR for your blogs and comment threads though!

Have to agree that now that we're into retirement we are much less anxious than we were previously. I wonder too if the money managers who forecast doom and gloom are in it to gain their commissions.

Yes Staci, I think that is often the case. Big commissions are often the reason for gloom and doom forecasts.

Jennfier

I definitely believe the financial advisors are in it for their commissions. I was really scared about retirement when I first started commenting. I did research on so many suggestions, and talked with two financial advisors. Many topics on this site steered me in the right direction to know what to ask a financial advisor. I am more comfortable about my choices because I made them, not letting some financial advisor tell me what I needed. Or how much I needed.

I will not disagree that some financial corporations and advisors are not looking out for their clients best interest. However, our financial advisor for over 20 years has done an outstanding job. He must get our permission and written authorization before making trades. He also is not paid on trades of stocks and bonds but a percentage of our portfolio it goes up he receives more it goes down less. He helped set up college funds for our daughters and balanced our limited choices in our 401k. Having a trusted financial advisor has been good for us. I was able to retire at age 60 (63 now) and my wife will at the end of this year at 63. Our last meeting he showed how things will work once we are both retired and living on a fixed income. Show how we will draw down the IRA to live we hope a comfortable retirement. He has grown our IRA by 4% each year I have been retired.
I guess what I'm saying is find a trusted financial advisor earlier then later and make sure you have trust in him.

HI Mary11 Ohio Medicaid has some rules, but you can own a home, a car, and there is something called spin down to qualify. And if you have savings they count withdrawals against qualifying so micromanaging is important. We take care of my MIL and we couldn’t get her qualified even with spin down, still $100 over. I figure most on this blog, are just barely over the income limit like the MIL. My wife wants a smaller place with lower utilities because of not wanting to be cleaning all the time in retirement. and I want my mancave. She done sold off a lot of things or gave them away. It took us a long time to find an area with more “freebies” in entertainment, activities, and retirement friendly. She wanted to retire at 62 but I talked her into 65. With an RV you can just go where those things are then move on to the next interesting place. I think retirement is in three phases, downsizing the home, then rental, then Nursing home or family. .... From William D

From Mary11... William, you’re definitely on the money with the 3 phases of retirement. Most people don’t realize that you’re most likely not going to live forever in your 1st retirement home. My parents moved from NY to Florida and lastly California. My mother also doesn’t qualify for any govt assistance and she receives less than $1800 monthly. Thank god she has medicare and GM is paying for her additional Blue Cross policy which includes dental for only $17 per month. If we end up not getting her home then we would qualify for assistance but I still worry about our future if that happens.

William, I lived in Oregon in the 90s until having to move to CA for family responsibilities. As I mentioned previously on where you can cut costs if you also cannot keep up with maintenance of a home you should really just rent or consider a reverse mortgage The health benefits I was speaking about would be free because you were in the low income bracket. I’m guessing most of the people on this blog might not qualify. I’m speaking on retirees who receive less than $1000 per month on SS and qualify for medicaid. I had to claim my benefits early because I’m home caring my elderly mother and if I wasn’t inheriting her home I would actually qualify. I’ve already traveled extensively so don’t really need to have that expense in my retirement. I’d be very happy just living out of a winnebago and travelling not too far from home. I’m noticing that the percentage of people who are willing to downsize is not very high and don’t understand that. Who is going to be able to do all the cleaning and maintenance of the home when you’re not physically able to??

(these comments moved here from unrelated Blog)

Note from Admin to Louise W: Hear hear - yes, we would love it if more people at Topretirements would speak up! The ones that do (thank you!) are great, we just more people to contribute. Regarding comments removed, we only remove (or more often, move) them for 2 reasons:
- They violate our site rules (too mean, too political)
- Or, they are off topic. In which case we move them to a topic where they fit better. Nothing kills an interesting topic faster than someone chiming in on a completely un-related topic.

Note to JCarol: Yes, we wish our Forum were more active. Topretirements is a very active site, but most of the action takes place in the Blog. You can feel free to start a Forum topic and see what happens, you might be surprised. As an alternative, if you have a topic you want to pursue, send us a suggestion for the Blog. We will either start a Blog on that topic or put it in an existing one where there are already lots of topics. With 851 Blog articles in 18 categories in the bank, chances are pretty good there is already a pretty good discussion going on what you want to talk about!

Of course sometimes the conversation slides into a new direction gradually, and that makes it harder. But the effect is the same - end of active chat! Thanks

We have been retired for 18 years and one of the most significant discoveries we have made is that you can live on a lot less than the prognosticators think you can. I would agree that their major motivation is their commissions. If you watch what you spend, look for things to do that are not that costly, prepare most of your meals at home, look for bargains, take trips at non peak times, buy tickets way in advance and use the web to search for best prices on hotels, flights, don't buy any new stuff, especially furniture just before you retire if you are going to move away cause most of it won't fit at the new destination anyway, live light with regard to "stuff" you don't need, sit down with your finances together at least every three months and stick to your priorities and needs and forget the frivolous wants (they are not going to be gratifying anyway), you will be surprised how easily you can do it.

Keep your car maintained and hang onto it. Figure out if you really need the second car or can get along without it using a little creativity. Pick up a part time job only if you would enjoy it. Otherwise volunteer. Think smaller house--you won't use the other half of the house you think you will use. People will come to visit once or twice for the first couple of years and you won't see them again, so you don't need all the "guest suite" stuff. It will just gather dust.

Enjoy the little things like a daily walk, having friends over for a BBQ, a free concert in the park, sunset with cocktails, a good book, a bike ride, a game on TV rather than going to the stadium. Keep yourself healthy and in shape. If you are a golfer, use the cpu to book best green fee prices instead of a club membership. Better yet, skip the sport unless it's a huge passion. Find a hobby/sport/recreation that is satisfying and inexpensive. Golf can be frustrating and very costly.

Be a minimalist. Eat less, buy less, enjoy simple things. Make your own things to decorate and learn to do the repairs and upgrades yourselves. Cut the electronic and entertainment frills out unless you find you really miss something. Take the time to read reviews and price comparisons before hiring someone or buying something. Hire only registered contractors so if any thing goes wrong you have recourse. Set your budget every month and stick to it. Know where your money is going and cut out things you don't use that much or don't make you that happy. Set goals to save for those things you think will make you happy. You might get a kick out of buying a new outfit, but if it sits in the closet cause you have no place to wear it, what's the point?

The most critical move before even considering retirement is to eliminate all debt and own your own home. If your kids are in financial trouble or you think they might be in the near future, rethink the whole idea. If you really like your job and boss and colleagues and the things you like to do where you live, rethink the whole idea. Nothing worse than retiring and moving away and then finding out you're bored or you miss the family back home or they need you to bail them out back home. Talk over everything before you decide to move, like how important is the weather to you, city vs small town, political views of your potential new place, risks of moving there vs the perceived pleasures to be found living there, making new friendships, possible stress creators like traffic, crime, cultural differences, isolation, high cost of living, housing you would like and can afford, things to do.

It's a big step, yes, but it's also easier than you think if you just discuss and plan and figure out what you really want and don't be tempted by what you don't need.

Mike T - You brought up excellent points and give great advice from top to bottom of your post.

Mary11 (I think it is your comment that Admin posted above). You posed an interesting question about why people aren't downsizing. I can explain my own decision about that. Our home is worth roughly $700K and is paid off. We want to remain in this area because our kids and friends are here. Other than being about 500 feet too large and having a pool that we rarely use, it suits us quite well. One story, good layout, great neighborhood, etc.

If we downsized about 500 feet the next house would cost roughly $550K. So a gain of $150K. Take off taxes and RE commission and it's now a $100K gain. Throw in moving costs, new furniture (not everything would work in the new house - that's a given) and we'd shave another $15K or so off.

Bottom line, $85K isn't enough for us to gamble the devils we know (a new roof, recent HVAC upgrade, copper plumbing, newly remodeled kitchen and baths, terrific neighbors) for the devils we don't. For now, we close off the HVAC to the bathroom and bedrooms that are now relegated to two guest rooms and one toy storage room for grandchildren, and I give them a quick dusting once a month. Max of an hour a month even if overnight guests are expected.

In ten years might we choose differently and decide to live in a condo? Perhaps. But for now the dollars we'd gain aren't worth the hassle and expense of moving.

One comment I would make about downsizing. Your health? Even if it's good right now, you may want to plan for a one story house minimum. Just went thru it with both of my parents and my husband! Broken hip, broken leg and knee replacement. One parent had downsized and had minimum issues, the other hasn't downsized yet and had more time in rehab facility and still has difficulty getting from living room to bedroom (much larger house with master suite upstairs). Both had awesome spouses who were able to help. You may be one fall away from having to move.

Lindal, my thoughts exactly...JCarol, when I'm discussing downsizing I mean reducing at least 50% of the homes square footage. Most people don't want or think they could adjust to that, but when you get on in years you're not going to want such a large home to maintain and that's not even speaking on the utility bills. Some people are on a limited income and they are just trying to find ways to make their budget stretch as much as they can. Myself, I would be happy living in a cozy 700 sq ft cottage, but that's not for everyone...

Linda and Mary11- you offer good thoughts to ponder.

A few years ago, DH and I seriously considered moving and downsizing, but not halving our space. He said that we'd worked for decades to get this house the way we wanted it. Upon retirement we'd finally have time to fully enjoy our house, garden and neighborhood, something he'd hoped to do so for at least a few years. He believes that when it's time for us to move, we'll know it and our children will know it. So we tentatively committed to staying put until we're 70 (health and finances permitting), with the plan of reconsidering our options then.

DH and I are blessed to be emotionally and geographically close to our children. When the time comes for us to sell the family home we know that we can count on them to help and support us through that, just as we support them through their life challenges.

In the meantime we continually purge and declutter. Having recently cleared two houses (both sets of parents), I know firsthand how much junk accumulates in people's homes. It's a lot more than any of us wants to imagine or believe.

JCarol, since you have not reached your 70s yet you still have some time to ponder what your next move might be. Like some one stated recently there really are 3 stages of retirement....for example I was researching a nice independent 55+ condo community that provides daily meals, housekeeping and trips. I looked closely though and noticed that 90% of the people living there were in their 70s to 90s. I don't think that would work for us since Iam in my early 60s and hubs in his early 50s. So it's not easy choosing one place to live for your entire retirement.

From Laney (reposted here for a better fit)... Louise, have you thought about active adult communities? I lived in one in Lincoln, CA for a while. In a way, the town had grown up around the community. Stores and services were right next to the community, The town encouraged Neighborhood Electric Vehicles and many residents had them so they could go for a cup of coffee or groceries using their NEV. The community also had busses & took residents to places further afield. There were also lots of bus day trips to local attractions. For people who no longer like to drive, it was an excellent place to live. Laney

From Mary11 (reposted here for better fit) Laney, that’s what I’m looking into. Depending what state you want to live in the prices vary. In Portland Oregon they start at $1400 per month for a 1 BR, which includes everything including meals and many outings. In Eugene you can get a 1 BR with transportation and breakfast for $800. Lincolncity, has a studio for $750 , which includes all your utilities including cable and complimentary washer and dryer, but no meals or outings. It really depends on what you want or need… Anyone interested on the west coast you should check out Vintage Retirement Apts. They have 25 communities in WA, 1 in Oregon , 5 in CA, aND some in NV. Prices range from $675 to the $900s with no meals.

I just read another article that mentioned the 4% guidance for withdrawals from savings in retirement. I am confused. If I have $1M in a 401K and withdraw 4% a year, that would give me a retirement income of $40K (plus Social Security). If the average rate of return for my 401K is 4% or higher, doesn't the 4% guidance mean that the principal would never be touched? My heirs will be happy.

Editor's Comment: Great question Sharon, so many people have the same thoughts. We have reposted your question and any responses to one of the articles we wrote on this issue, https://www.topretirements.com/blog/financial/rival-theories-to-the-4-withdrawal-rule-under-debate.html/ Not only does the article discuss your question, but there are a host of Member comments about it. If anyone else has thoughts about this issue, please post them over there.