Recent Survey Highlights Financial Struggles Among Retirees

Fewer than one-quarter of currently retired people feel "very confident" they'll maintain a comfortable lifestyle throughout their golden years. That's just one of the financial red flags waving in "Retiree Life in the Post-Pandemic Economy," a report released by the nonprofit Transamerica Center for Retirement Studies in November 2024.

The report is based on a survey of more than 2,400 seniors who no longer work. It includes additional findings on retirees' financial capabilities, concerns, and insightful takeaways for younger generations.

Key Financial Concerns

The survey reports that many retirees identify as "financially fragile." Notably, the world changed significantly over their working years, including significant shifts in employee benefits. In particular, workers are now expected to self-fund most of their retirement income. However, only half of the retirees surveyed believe they've built a sufficient retirement nest egg.

The report also shows that retirees' estimated median total household savings (excluding home equity) was $71,000. Only 22% have saved $500,000 or more.

Social Security benefits are the most cited source of retirement income (91%), with 58% citing it as their primary income source. In line with the reliance on Social Security, about 30% started receiving benefits at the earliest possible age (62), and 4% waited until age 70, which maximizes benefits. Only 20% expect their primary income in retirement to come from personal savings and investments.

Aggregating all sources of income, the report estimates that the median annual household income (HHI) for retirees is $55,000. About one-third have an HHI ranging from $50,000 to $100,000, and 20% have an HHI ranging from $100,000 to $200,000.

The survey reveals that top financial priorities among retirees include:

• Paying off debt such as mortgages, credit cards and other consumer debt (45%), and
• Building emergency savings (31%).

The median emergency savings for retirees is only $10,000 — and a worrisome 29% are just trying to cover basic living expenses.

Expectations vs. Reality

Around half of retirees (55%) said their current expenses align with their pre-retirement expectations. However, nearly one-third said their costs were more significant than expected. About 40% said their spending habits have remained about the same as before they retired.

The survey also asked respondents about their greatest retirement fears. Top responses include:

• Social Security being reduced or ceasing to exist (42%),
• Declining health that requires long-term care (37%),
• Outliving their savings and investments (32%),
• Lack of access to adequate and affordable health care (14%), and
• Lack of affordable housing (13%).

Only 13% of respondents have purchased long-term care insurance.

Importance of Proactive Retirement Planning

The Transamerica report recommends formulating a comprehensive plan to ensure you build ample savings to maintain your preferred retirement lifestyle. If you're nearing retirement, start by inventorying your assets (such as cash, real estate, retirement accounts and other investments) and liabilities (such as mortgages and credit card debt). The difference is your net worth.

Important: The report advises retirees to pay off debts and avoid assuming new loans, including reverse equity mortgages.

Next, identify potential sources of income, including:

• Social Security benefits,
• Pension benefits,
• Withdrawals from retirement plans and savings,
• Investment income, and
• Asset sales.

Financial advisors can guide you on issues such as claiming Social Security benefits and taking annual required minimum distributions from tax-advantaged retirement plans.

The next step is to create a budget to cover your annual expenses, including:

• Living expenses for yourself, your spouse, and any other dependents (if applicable),
• Insurance,
• Debt obligations,
• Health care expenses, including Medicare supplementals,
• Long-term care needs and/or home modifications necessary to age in place (if applicable),
• Taxes, and
• Inflation.

If your assets and sources of income won't sustain your preferred retirement lifestyle, you'll need to scale back your spending plans, delay retirement, and/or continue working part-time to make ends meet. Revisiting your budget each year is critical to curb overspending and preserve your nest egg through retirement. Survey respondents expect to live to a median age of 90, which means they anticipate nearly 30 years in retirement. Even if you're decades away from retirement, you can't afford to put retirement saving on the backburner. (See "In Hindsight: Wisdom for the Younger Generations" below.)

What's Your Retirement Plan?

The retirement-saving landscape continues to evolve at both the employer and governmental levels. So, future retirees must take a proactive stance toward saving. Whatever your age, the Transamerica report clarifies the need to gain more personal finance knowledge and seek professional input when necessary. Contact your financial advisor to help you chart a course to a stable retirement.

In Hindsight: Wisdom for the Younger Generations

Younger people can learn valuable insights from the Transamerica Center for Retirement Studies 2024 report (see main article). Key lessons from the retirement trenches include:

• 76% wish they'd saved more and on a more consistent basis,
• 68% wish they'd known more about the fundamentals of retirement saving and investing,
• 49% say debt interfered with their ability to save for retirement, and
• 49% believe they waited too long to address retirement planning.

Despite these findings, 69% of respondents say they did as much as possible to prepare for retirement. However, many are still short — and 41% of respondents believe they should have relied more on outside experts to monitor and manage their retirement savings when they were younger.