Coming out of the COVID-19 pandemic in 2020, seniors are excited about the years ahead in retirement, yet some are unsure if they’ll be able to afford a comfortable lifestyle in the long-term.
The pandemic in 2020 highlighted a severe need for greater savings and resources for retirees, as many continue to juggle competing priorities and financial obligations, reports Transamerica’s latest Retiree Life in the Post-Pandemic Economy study.
The research examined the health and wellbeing, personal finances, and retirement security of retirees, listing the top facts hindering retirees’ experiences and vulnerabilities. According to the findings, 69% of retirees believe they did as much as they could to prepare for retirement, while 76% say they wish they could have saved more and on a consistent basis.
Others hoped they would have received more information or were more informed about retirement savings. Sixty-eight percent of retirees wished they were more knowledgeable about retirement savings and investing, 50% would have liked more information and advice from their employers on how to reach their retirement goals, and 49% believe they waited too long to concern themselves with savings and investing.
“Retirement brings freedom and time for personal pursuits,” said Catherine Collinson, CEO and president of Transamerica Institute and the Transamerica Center for Retirement Studies (TCRS). “However, retirees are living on a fixed income with limited financial resources. Many would be unable to withstand a major financial shock, such as the need to pay for long-term care. Retirees’ fragile financial situation serves as a cautionary tale that underscores the imperative for strengthening our retirement system.”
Other top findings from the report include:
- Retirees are active and engaged in meaningful ways. Now that they are retired, retirees are spending more time with family and friends (58%), pursuing hobbies (43%), traveling (36%), taking care of their grandchildren (19%), doing volunteer work (16%), and caregiving (10%).
- Most retirees have positive feelings about life, but some are distressed. Most retirees are generally happy (89%), have close relationships with family and friends (88%), are enjoying life (86%), have a positive view of aging (79%), have a strong sense of purpose (79%), and have an active social life (53%). However, three in 10 retirees (30%) have trouble making ends meet, 27% indicate they often feel unmotivated and overwhelmed, 24% often feel anxious and depressed, and 17% are isolated and lonely.
- Retirees retired before the traditional retirement age of 65. Retirees retired at age 62 (median). For many, their working years and time to save were cut short. Almost six in 10 retirees retired sooner than planned (58%) and, among them, almost half did so for personal health-related reasons (46%) and employment-related issues (43%), while 20% did so for family-related reasons. Only one in five (21%) retired early because they were financially able.
- Retirees are juggling competing financial priorities. Retirees’ current top financial priorities include building emergency savings (31%), just getting by to cover basic living expenses (29%), and continuing to save for retirement (24%). Forty-five percent of retirees cite paying off one or more forms of debt as a current financial priority, including paying off credit cards (30%), paying off mortgages (20%), paying off other consumer debt (10%), and paying off student loans (3%).
- Retirees’ greatest retirement fears revolve around money and health, such as fearing that Social Security will be reduced or may cease to exist in the future (42%), declining health that requires long-term care (37%), losing their independence (32%), outliving their savings and investments (32%), and cognitive decline, dementia, or Alzheimer’s disease (28%).
- Social Security is the cornerstone of retirement income for retirees. Almost six in 10 retirees (58%) expect Social Security to be their primary source of income throughout their retirement.
- Retirees started claiming Social Security before their full retirement age. Retirees currently receiving Social Security started at age 63 (median) which translates to a lower monthly benefit than if they had waited until their full retirement age of 66 or 67, depending on the year they were born. Only 4% of retirees waited until age 70 or later which would have maximized their monthly benefit.
- Retirees have limited financial resources and many risk a savings shortfall. Retirees have an annual household income of $55,000 (estimated median) as of late 2023. More than one-third of retirees (36%) had an income of less than $50,000. Retirees’ household savings excluding home equity were $71,000 (estimated median) in 2023.
- The potential need for long-term care threatens the personal finances of retirees and their families. Only 13% of retirees are very confident they would be able to afford long-term care, if needed – and only 13% have long-term care insurance. When asked if their health declines and they need help with daily activities and/or nursing care, almost half of retirees (48%) say they plan to rely on family members and friends to provide such care. Moreover, relatively few retirees have codified their wishes in legal documents such as powers of attorney and advance directives.
- Untapped opportunities might help retirees strengthen their financial situation. Retirees need to be fully engaged in financial planning or taking steps that could improve their overall situation. Only 24% indicate they have “a lot” of working knowledge about personal finance, 19% have a financial strategy for retirement in the form of a written plan, and just 7% frequently discuss saving, investing, and retirement planning with family and close friends. Only one in three (33%) use a professional financial advisor.
SEE ALSO:
Americans List Social Security, Medicare as Priorities for Congress