It’s not retirement planning. It’s life (financial, physical and emotional health) planning.
For many people, retirement is a reward for decades of daily work—a time to relax, explore, and enjoy the life they dreamed. For others, though, retirement can be a frustrating period marked by loss of identity provided by the workplace, declining health and increasing financial, physical and emotional limitations.
Once upon a time, the decision to retire was easy for most Americans and, in many cases it was encouraged. At some time between age 62 and age 66, often at age 65 which corresponds with Medicare eligibility, Americans pilled the plug and retired from the workforce. We retired with Social Security benefits, a healthy pension, and some form of employer-paid health insurance. The question was not whether we would retire by age 66, but when between age 62 and age 66.
Today, for most working men and women, the decision of when to retire from the workforce is more complicated and more difficult. For many, the question is not when to retire, but whether traditional retirement is feasible at all.
Planning for Retirement
Life is ten percent what happens to you and ninety percent how you respond to it. – Lou Holtz
While Individuals increasingly have to take responsibility for their financial security during retirement, the majority of Americans do not appear to have done much retirement planning. Forty-one percent of respondents to a FINRA Foundation survey have tried to figure out how much they need to save for retirement, while 54% have not. The act of planning for retirement is a strong positive indicator of retirement wealth.
Recognizing that many Americans are not familiar with the technical terms and distinctions used to describe various types of retirement plans, the FINRA Foundation survey employs plain-language questions to assess whether respondents have a retirement plan through an employer, and if so, which type (specifically, a defined benefit plan or a defined contribution plan, such as a 401(k)). In addition, the survey asks whether individuals have retirement accounts they set up on their own, such as an Individual Retirement Account (IRA), Keogh Plan, SEP, or other type of retirement account. More than half of all non-retired respondents (58%) have some kind of retirement account, either employer-based (for example, 401(k) or pension) or independent (for example, IRA). Despite a decades long bull market, GDP and the considerable improvement in Americans’ ability to make ends meet relative to 2009, the percentages of those who have planned for retirement or have a retirement account have not shifted much over the past decade.
Source: The State of U.S. Financial Capability: The 2018 National Financial Capability Study, FINRA Foundation page 17
Additionally. U.S. Census Bureau data show an upward trend over the past 20 years in the percentage of men and women who remain in the workforce over the age of 65. For example, in 2008, 72 percent of employed men age 65 to 69 were working full-time, compared with 57 percent in 1995 and 56 percent in 1990, an astonishing difference.
Source: (http://aging.senate.gov/crs/pension34.pdf)Cdc-pdfExternal.
As contributing factors, economists cite a decline in traditional pension plans, a drop in the percentage of employers that offer retiree health benefits, and the impact of the economic upheaval on individuals’ and families’ financial security. Retiring on a nest egg and a fixed income becomes increasingly less desirable when the nest egg is cracked, retirement benefits are calculated in large part on Social Security, and the prospect of medical bills looms.
Source: Howard, John, M.D., Director, NIOSH, From the Director’s Desk: The Gold Watch Decision, Volume 8 Number 6 October 2010.
People are supposed to relax when they retire, not worry about financial problems. They are suppose to kick back and enjoy life since everyday should feel like a Saturday during retirement, and for the first time, they are supposedly in control of their day-to-day leisure and non-leisure activities.
Unfortunately, Studies show that millions of retirees turn to alcohol for relief from boredom, a limited lifestyle and loneliness, but there are better ways to “living the dream” lifestyles retirees desire than through booze and drugs.
Additionally, there are no guarantees with your physical or emotional health, just as there are no guarantees with your wealth. But, you can stack the odds in your favor by making sacrifices today that are worth the potential gains in the long term.
A survey conducted by Fidelity Investments in collaboration with the Stanford Center on Longevity 1 provided several significant insights regarding why people decide to retire from the workforce. While financial and work-related factors were many of the primary reasons people continued to work, with the age of eligibility for to start receiving Medicare and Social Security benefits standing as key factors, the survey also finds that it’s often nonfinancial factors like family, health, and lifestyle that ultimately cause people to pull the plug to retire.
Among retirees, 72% chose leisure as a reason to retire, 64% pointed to wanting to escape the stress at work, and 62% cited a desire to spend more time with family and grandchildren, if they had them.
One additional reason people decide to retire, especially for those living in metro Atlanta, site frustration with Atlanta’s infamous traffic congestion and the desire to escape the daily grind of the morning and afternoon commutes.
And, there are shifts in Americans’ values as they near retirement. Many Americans seem to desire freedom over money. They value spending time where it matters most to them and look forward to the freedom that retirement brings such as spending time with their family, volunteering or doing hobbies they enjoy. The ultimate objective is to trade job stress for leisurely interests.
Footnote 1: The Fidelity Investments Decision to Retire research represents insights from a series of in-depth interviews conducted in Boston, Chicago, and San Francisco and from an online survey of more than 12,000 defined contribution plan participants record kept by Fidelity, ranging in age from 55 to 80 across all industries and income levels, who felt they had some control over their decision to retire. The research was completed in 2015 by Greenwald & Associates, Inc., an independent third-party research firm. Fidelity also worked in collaboration with the Stanford Center on Longevity on the study.