A majority of retired Americans recently surveyed by Prudential Financial said that they are living their “dream retirement.” Mass affluent respondents were unsurprisingly the most likely group to say that they are “living the dream” in old age, but even 37 percent of less-affluent retirees said that they are equally pleased with their current standard of living. How were these individuals able to enjoy more than just a financially secure retirement? One thing that definitely helped was an early start to their saving, as respondents living their dream retirement were found to have started setting money aside an average of six years sooner than those less content with their old-age lifestyle. Other common financial best-practices shared by satisfied retirees included having diversified sources of income, an understanding of how their money is being invested, and a willingness to work with a professional advisor.
With healthcare inflation likely to pick up, a growing need for long-term care, and the potential for lower Social Security payouts in the decades ahead, it is understandable to worry that younger generations could have a harder time achieving a dream retirement. However, many pre-retirees appear aware of the challenges they face, therefore making it more likely that they will start taking the necessary steps sooner rather than later to ensure an ideal retirement lifestyle. Only 70 percent of surveyed Gen-Xers, for instance, said that they expect to receive Social Security benefits when they retire, and just 51 percent of Millennials feel the same. These pre-retirees that recognize they may have to rely less on Social Security and pensions than older generations are encouragingly planning to have more sources of income in retirement than current retirees. Moreover, younger respondents acknowledge that much of their retirement income will be generated from their savings accounts, in turn making a sound investment strategy critical for achieving their old-age financial goals.
There is still a lot of room for improvement, though, as two in five surveyed pre-retirees said that they are “not at all sure” how much monthly income they will need in retirement to provide their ideal standard of living. Among the respondents that were able to provide an estimate of their income needs, 43 percent simply guessed, while not even a quarter said that they used an online retirement calculator and/or spoke with a professional financial advisor. In terms of total retirement savings needs, surveyed Gen-Xers on average had a much higher estimate than Millennials ($2.5 million vs. $1.1 million), which the report’s authors attributed to greater concerns about healthcare costs and the sustainability of the Social Security program. Perhaps most alarming is that nearly one in five Gen-Xers and one in three Millennials said that they have yet to start saving for retirement. The top two reasons cited by these respondents for not setting any money aside were “a lack of extra cash to save” and “other financial priorities.”
Sources: Prudential Financial
Post author: Charles Couch