Why “I’ll just retire later” is not a good strategy.
As Servant Solutions’ staff travels around the country and have deep conversations, it seems there is an increasing wave of our members that make the alarming assumption they can just “work longer” to offset their lack of retirement savings over the years. Reliable research suggests otherwise. As in prior years, there is a big gap between when active workers expect to retire and when retirees say they actually did, according to the 2020 Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute (EBRI).
Though the median expected retirement age for workers and retirees has remained unchanged for years (age 65), workers remain notably more likely to say they expect to retire at age 70 or older than at times in the past. Although 20% of workers expect to retire at age 64, about 80% (a whopping 4x more!) actually retire at age 64. This difference is an alarming gap in expectations versus reality.
REASONS RETIRING LATER DOESN’T PAN OUT
One reason for the gap is that many Americans find themselves retiring unexpectedly. The RCS has consistently found that a large percentage of retirees leave the workforce earlier than planned (48% in 2016). Many retirees who retired earlier cite hardships for leaving the workforce when they did, including:
health problems or disability (41%)
changes at their company, such as downsizing or closure (26%)
having to care for a spouse or another family member (14%)
other work-related reasons (19%)
Luke Vandermillen, Vice President of Retirement and Income Solutions at Principal (our recordkeeping partner for Servant Solutions) says, “I think any time we talk about retirement, everyone makes the assumption it’s their choice. When you ask people if they are saving enough and they say they have procrastinated and got a late start, many times they say they’ll just keep working or ‘I’ll never retire.’” He adds that the finding that more than half of retirees retired earlier than expected because of their health or taking care of family shows it may not be a person’s choice to retire later.
The financial consequences of an unplanned early retirement can be heavy. Retirees who retire earlier than planned are not confident about having enough money for a comfortable retirement or about paying for basic expenses, medical expenses, and long-term care expenses…all of which are compounded by inflation. Are you willing to take that chance with the 15-25 years spent in retirement where you are the provider of your own paycheck?
Vandermillen notes that the RCS found only 4 out of 10 workers have tried to figure out how much they need for retirement. So, to prepare for the possibility of not being able to retire later, “the first thing we should tell people to do is figure out how much they need,” he says.
He also says most people will be well-served by seeking the services of a financial adviser. “The concept of retirement can be intimidating. There are many facets—managing debt, saving at the right rate, where to invest—it is a good idea for people to not figure this out on their own,” he states. At Servant Solutions, we provide FREE financial planning through our Financial Roadmap process. Through a simple process, we can find out how much you will need for retirement and then set action steps to help you meet your goals. Contact us to get started!
Yes, optimism is a great thing to have…except when it gets unrealistic. If you find yourself defaulting to “I’ll just work longer”, “I’ll just get a part-time job”, or “I’ll just never retire”, it’s time to get real. Assuming that it will ultimately be “your choice” with any of the statements above is not a reliable retirement planning strategy. At Servant Solutions, we are your retirement and financial planning partner, and we care about your future. Let us help you fill the “expectation gaps” of your retirement timeline and your goals with realistic, reliable, and biblical planning.