Personal Finance

6 Ways Older Americans Feel Unprepared for Retirement

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A stressed older worker holding his forehead
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Feeling a little unsure about your ability to retire comfortably? You’re not alone.

For its 2021 retirement readiness research, the Insured Retirement Institute asked nearly 1,000 U.S. workers, ages 40 to 73, for their thoughts on just that. The survey indicates that many workers “are not confident in their retirement prospects.”

“Most have not saved enough to bridge the gap between what Social Security will provide and what their savings can generate, especially as so many plan to retire before full retirement age,” the institute notes.

The following concerns are keeping a majority of older workers up at night, according to the institute’s findings. Do any of them resonate with your own experiences?

Being able to recover from a market correction

Man worried about a volatile stock market
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Respondents who are confident in this aspect of their retirement preparation: 29%

Overall, only 29% of respondents said they will be able to bounce back financially after a downturn in the stock market. Interestingly, both the youngest (37%) and oldest (34%) age groups surveyed are the most confident about riding out a serious market correction.

The Insured Retirement Institute said this might be because younger workers (defined here as those ages 40 to 45) know they’ll have more time for their retirement accounts to recover and older ones (ages 67 to 73) tend to have less money in riskier investments.

A part-time job in your golden years can be a good hedge against market losses. A regular salary might mean you can withdraw less from your retirement account, giving your investments a chance to rebuild.

Having enough money for long-term care

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Respondents who are confident in this aspect of their retirement preparation: 33%

There’s a good reason people fear this: The median cost of long-term care in the United States can range from $1,603 to $8,821 per month.

And Medicare does not cover long-term care. Medicaid, another government health insurance program, often covers it, but Medicaid is generally only available to people with low incomes.

Unless you bought long-term care insurance when you were younger, it is indeed possible to run through your savings to pay for such care.

Having enough money for medical expenses

Senior man in the hospital
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Respondents who are confident in this aspect of their retirement preparation: 42%

Overall, 42% of those surveyed think they’ll have enough money for any medical care they’ll need in retirement. But they might not know that Medicare doesn’t cover everything — a fact that catches quite a few retirees off-guard when it’s time for things like hearing aids, routine vision care and most dental work.

It’s worth noting that only 24% of those aged 67 to 73 believe they’ll be able to cover all their own medical expenses. The other 76% of that cohort has likely been there, paid out of pocket for that.

Being well prepared for retirement

Man pondering stock trade
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Respondents who are confident in this aspect of their retirement preparation: 43%

Overall, 67% of respondents wished they’d started saving for retirement sooner, and 65% wished they’d saved more.

One-third of respondents are currently saving less than 5% of their income, as opposed to the 10% to 15% recommended by many financial planners. The Insured Retirement Institute calls current savings rates “inadequate” for the task of keeping retirees afloat.

There’s a disconnect between the notions of “retirement” and “saving for retirement.” Only 4 in 10 have tried to calculate how much they should be setting aside right now in order to have enough money when they quit working.

Having enough retirement income

Broke man overwhelmed by bills
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Respondents who are confident in this aspect of their retirement preparation: 44%

One-third of those surveyed plan to retire before age 65, which means they’ll get permanently reduced Social Security benefits. Not that Social Security was intended as a sole income source in retirement; in fact, the average monthly benefit among retired workers is just $1,559.

The survey points out that workers “may have [retirement] income expectations that are unrealistic.”

For example, 62% of those earning $30,000 to $75,000 a year say they expect retirement income of $45,000 or more a year. Since those workers will likely get $25,000 or less in Social Security benefits, they would need $20,000 a year from personal retirement savings to make up the difference. But as noted previously, many aren’t saving enough and some have no savings at all.

Having enough money to live independently

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Respondents who are confident in this aspect of their retirement preparation: 44%

Overall, less than half (44%) of survey respondents believe they will have enough money to live independently in retirement. The number rises to 49% among the ages 56-to-61 cohort.

They have reason to be concerned: Of those who live to age 65, about 70% will need long-term care before they die, according to the U.S. Department of Health and Human Services. This care is usually for a relatively short amount of time – but as noted earlier, long-term care costs big bucks.

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