Retirement isn’t what it used to be, as most people can’t afford to stop working at 65 to live comfortably on their savings and Social Security. Since people are living longer than ever now, people have to make their retirement funds stretch further. Sadly, for most people, it’s not stretching far enough.
Long Lifespan
Many Americans seriously underestimate how long they’re likely going to live for. One survey found that 25% of people don’t realize how long they’ll actually need their savings to last, which could have serious consequences. In some cases, it means they’ll run out of money way sooner than they expected.
More Seniors
The number of older people is also increasing, as census data shows that there were 15.5 million more people aged 65 and older in 2020 than in 2010. They represent approximately 16.8% of the American population, and this trend isn’t slowing down. While better healthcare does mean longer lives, it also means people need to have an income for more years.
No Savings
Approximately 43% of boomers don’t have a single dime saved for retirement, as they’re relying on Social Security instead. Currently, Social Security pays recipients an average of $2,000 a month, which is just enough to cover the basics. But for retirees who want to maintain their old lifestyle, that’s just not enough.
Social Security’s Not Enough
While Social Security is no doubt helpful in paying the bills, it’s not a cure-all. It won’t be enough to cover things like medical expenses, which are particularly high during retirement. Health issues are a part of getting older, whether we like it or not, and funds falling short of covering these can be a serious problem.
Social Security is Suffering
As more people are starting to depend solely on Social Security, the system is under pressure. Some economists are worried that it won’t be able to support people because there are too many people who are eligible to claim. This means that seniors will need to plan their finances and resources more carefully than they did before.
The Cost of Staying Healthy
As we get older, our bodies need more care, and that doesn’t come cheaply. Even with Medicare, the out-of-pocket expenses for medical care can be enough to completely destroy someone’s retirement savings. Many seniors are forced to use the money they were saving for something else, or worse, go without the necessary treatment.
Surprising Costs
Many retirees are also finding the costs of retirement much higher than they thought. Those who are lucky enough to have savings often have less than half of what most economists recommend. This means that they become even more vulnerable to financial issues as they age.
Working Past Retirement
Since so many people don’t have enough saved up, lots of them are continuing to work beyond 65. But it’s not possible for everyone, as age often pushes people out of the positions they’ve had for a long time. In some cases, seniors have to look for whatever work they can get, which can force them to take on a new career path just to pay their bills.
New Careers
For some people, working past retirement means taking on positions where they’re being paid hourly instead of receiving a set income. This could involve working at a local coffee shop or large retailer. Usually, this means they’re making a lot less than before and have to adjust their lifestyle to fit this new reality.
Low Wages
Earning around $15 an hour is a big jump from what many seniors used to earn, which makes it hard for them to maintain the same standard of living or cover any unexpected expenses. Many seniors are forced to budget or cut corners to make ends meet. As a result, lots of them can’t support their families in ways that they might’ve hoped to.
Adapting to Changes
Older adults who have to work later in life also need to adapt to their new jobs. Although these positions might be less physically demanding, they’re usually a lot less fulfilling as well, both mentally and financially. This can be pretty tough to deal with. On the positive side, new jobs can also open the door to developing new skills and interests.
Economic Insecurity
One study found that 80% of homes with older adults are either currently struggling with money or predicted to do so. For many of them, this is because they don’t have enough savings to cover any unexpected expenses. The same study also found that income decreased in 90% of older families in just two years.
Gender Differences
Sadly, there is also a gender divide, as retired women face more financial challenges than retired men. Many retired women don’t have any retirement savings compared to retired men, which is mostly due to the gender pay gap. They have lower lifetime earnings compared to men and are often unprepared for retirement.
Planning for Retirement
Most importantly, seniors need to plan for retirement carefully. They need to understand how long they’ll realistically retire and how they’ll get enough money to support themselves during these years. This way, they’ll spend less time worrying about finances and more time enjoying those well-earned golden years.
The Impact of Inflation
Inflation is also a serious threat, as it can affect people’s purchasing power. Even if they had enough saved before, rising inflation means people’s dollars don’t stretch as far as they once did. To avoid this, some economists recommend investing in dividend stocks because they’ll help keep your savings in line with rising costs.
Financial Fears
Many seniors are worried about a lot of financial issues, including high medical bills and identity theft. In particular, older people who haven’t retired yet are most afraid of someone stealing their money. Staying informed and sticking to trustworthy protection services can help you to avoid these kinds of dangers.
Retirement and Taxes
Believe it or not, retiring doesn’t free you from the taxman, as Uncle Sam expects payment from your pension, Social Security, and your IRA. Knowing how to handle your taxes will save you a lot of money and headaches, so try talking to a tax advisor. They’ll help you plan your withdrawals and keep more of your own cash in your own pocket.
More Access
Some states are trying to help people who don’t have retirement plans at work, which currently includes around 56 million private sector workers. They have begun “auto-IRA” programs that automatically enroll workers into retirement accounts so they can immediately start saving. This has already helped 800,000 people save over $1 billion.
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