In the United States around 10,000 Baby Boomers turn 65 every single day, and roughly one in five Americans will be at least this age by 2030. Further, by 2035 it is expected that there will be more 65-year-olds in this country than people under the age of 18 for the first time in U.S. history. All of the above-mentioned projections will only add to concerns about the long-term sustainability of Social Security and Medicare, which along with rising life expectancy should highlight the growing importance of self-funding when it comes to achieving a comfortable and financially secure retirement.
On the bright side, many Americans appear aware of the challenges associated with longer life spans. An earlier Wells Fargo poll, for instance, found that nearly 4 in 10 U.S. workers said that they believe living past the age of 85 would create a financial hardship. Hopefully these individuals are already taking the necessary steps to address their concerns because 42 percent of surveyed workers reported that they anticipate living past the age of 85, including 10 percent who envision surpassing age 95. Some people understandably are not in any rush to think about such issues but from a financial standpoint, preparing early on for retirement is the best way to ensure an ideal standard of living in old age.
This is especially true since “there is a strong likelihood that retirees will live longer than they expect,” according to Fredrik Axsater, head of Strategic Business Segments at Wells Fargo. Saving as much money as possible and investing (growing) these assets will of course play a big role in helping individuals enjoy an ideal retirement, but detailed planning is another critical component that must not be ignored. In fact, Wells Fargo found that surveyed workers who demonstrated having a “planning mindset” have a higher likelihood of being in better financial shape, both now and in the future. Specifically, the report’s authors identified people as having a planning mindset if they exhibit a few key attitudes and behaviors:
- Setting a financial goal during the past six months.
- Working toward a long-term goal.
- Feeling good about planning financial matters over the next one to two years.
- Preferring to save for retirement now rather than waiting until later.
Surveyed workers who met all four of these requirements were found to be nearly twice as likely as those without a planning mindset to currently have a “thriving financial life.” Individuals with a planning mindset on average also had 3.1 times more retirement savings than respondents without a planning mindset, and were 42 percent less likely to report high levels of financial stress. The former is not too surprising considering that across all surveyed workers, 84 percent of those identified as having a planning mindset said that they regularly contribute to a retirement savings account, compared to just 66 percent for the rest of the sample.
Moreover, only 27 percent of surveyed workers with a planning mindset said that they believe living to age 85 or later would be a financial hardship, versus 43 percent for those who lack the forward-looking disposition. Joe Ready, head of Wells Fargo Institutional Retirement and Trust, added that “Regardless of income, establishing a financial plan and living a life focused on financial goals can deliver many benefits, including less stress and higher savings, which are the foundations for building a successful retirement. Maybe money can’t buy happiness, but planning early can provide more confidence about the future — which is spanning across decades for many retirees.”
Sources: Pew Research, U.S. Census Bureau, AARP, Wells Fargo