The 2018 Retirement Confidence Survey (“RCS” – a joint venture between the nonpartisan Employee Benefit Research Institute and research firm Greenwald & Associates) is out and about two-thirds of Americans feel confident or at least somewhat confident in their ability to retire comfortably. Yet nearly the same share say that preparing for retirement makes them feel stressed.
You may think that these feelings arise because so many have saved very little. Among respondents who are still working, 45 percent report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit pension plans, is less than $25,000. Nine percent report totals of $25,000–$49,999, 11 percent have $50,000–$99,999, 15 percent are at $100,000–$249,999 and 21 percent have $250,000 or more.
But when many of those who have saved very little call my radio show or podcast, they don’t actually seem stressed. They are clear-eyed about their priorities and seem to know what they need to do. But for those who have managed to accumulate some money, usually $100,000 or more, that’s when the worries seem to start.
Perhaps the stress comes from not knowing or fearing what lies ahead. According to RCS, although so many are anxious about the future, a whopping 62 percent of workers have not actually calculated how much money they will need to have saved so that they can live comfortably in retirement.
It’s hard to feel confident about reaching a goal when you have no idea what it would take to do so or what your options might be to achieving that goal. There are a zillion retirement calculators available online and I encourage everyone to try them out, but before you do, you may want to ask yourself, “What am I so afraid of?”
If you are worried that you will not have enough, then doing nothing only makes the problem worse. Maybe the issue is that the process of projecting your retirement needs means you actually, finally, once-and-for-all need to figure how much you are spending right now. That alone might deter many from addressing their retirement needs. And for some, the retirement planning process may surface feelings of financial inadequacy.
But in my experience, I have found that the retirement planning process can be enlightening and help you get on a path forward, but it can also raise tough choices. You may find that to hit your goals, you need to either save more today, reduce your income during retirement or work longer. Each has inherent upsides and downsides.
Saving more today sounds virtuous, but then you think, “Who knows what will happen? I should live for today!” Reducing income needs in retirement is a possibility, but then there’s the risk that when you actually are in retirement, it’s harder to downsize than you think.
Finally, working longer may sound like a great idea when you are 45, but twenty years in the future, it might not be an option. The RCS found a startling disconnect in the survey between workers’ expectations about relying on income from work in retirement, compared to retirees’ actual experience: 68 percent of workers expect income from working to be either a major or a minor source of income in retirement, whereas only 26 percent of retirees say that this income is a major or minor source.
For most, the retirement planning process requires us to get real about what we are willing to do today in order to secure our future. The answers are rarely simple, but one thing is certain: doing nothing is the worst option.