LiveCareer, a career service focusing on resumes and cover letters, recently released a survey with startling results. According to LiveCareer’s Retirement Sentiments Report, 61% of workers fear retirement more than death. In fact, workers fear retirement more than a lot of things. Here’s a quick sample:
- 64% fear retirement more than getting a divorce
- 54% fear retirement more than getting fired
- 53% fear retirement more than falling into poor health
What are we afraid of?
Over one-third of the survey respondents say they’re worried about not having enough saved to cover medical emergencies or unexpected retirement costs. The same number of respondents reported their fear of becoming a financial burden on loved ones.
Another recent poll from Public First, commissioned by the Bipartisan Policy Center’s American Savings Education Council (ASEC), sheds light on factors driving our retirement-related anxiety.
Social Security funding
This survey found that non-retired respondents are concerned the Social Security program will not be fully funded when they retire. Unless Congress intervenes, the primary Social Security trust fund will be depleted by 2033 or 2035 (depending on the source), leaving many to believe they won’t be able to collect on the Social Security they’re currently paying into.
Current headlines
It’s tough to go a day without seeing a personal finance article reminding us how far behind we are in retirement savings. And headlines suggesting the average American needs at least $1.4 million to retire comfortably cause considerable stress. Given that the average retirement savings among Americans of all ages is $88,400, it’s no surprise that retirement feels so scary.
As we compare our retirement savings to the $1.4 million some tell us we need, it’s difficult to imagine how we’ll ever be ready.
Should we panic about retirement?
Along with sharing survey findings, the Bipartisan Policy Center (BPC) offered its conclusions as to why so many Americans are stressed and uncertain about retirement. According to BPC, part of the problem is a widespread misconception that Social Security will cease to exist if its trust fund runs out of money.
BPC insists that Social Security payments will never stop, even if the worst occurs and Congress allows the trust fund to be depleted. According to BPC, the worst thing that could happen would result in a 20% cut in the Social Security benefits a person receives. For example, someone receiving a monthly Social Security check of $2,000 could find themselves down to $1,600.
A 20% cut could be financially devastating for anyone living paycheck to paycheck. However, for the worst to occur, Congress would have to ignore the 70 million Americans who receive Social Security benefits and their (rightfully) concerned families.
Regardless of how much posturing they engage in, members of Congress must know that failing to fund the trust fund is the fastest way to be voted out of office. As one of the few programs with broad support across political lines, allowing cuts to Social Security is a sure way out of D.C.
Not their first rodeo
This is not the first time Congress has faced the prospect of a depleted Social Security trust fund. The last time was in 1983, when Congress found a fix through bipartisan legislation that increased the full retirement age from 65 to 67 and began charging income tax on benefits. Congress has a few options if it wants to avoid cuts to monthly benefits. For example, it can:
- Increase the payroll tax (another move that would be unpopular)
- Increase the income limit. Americans only pay Social Security payroll taxes on the first $168,600 they earn annually. Once they hit $168,600, the payroll deduction disappears. Another option Congress has at its disposal is to raise that income limit.
- Increase the age at which workers can claim benefits.
In other words, if Congress wants to come up with a solution, it can.
How much do you really need for retirement?
According to the Employee Benefit Research Institute (EBRI), only 3% of retirees saved more than $1 million. That means 97% of retirees are nowhere close to $1.4 million, and many seem to be doing fine. A Gallup poll found that 79% of retirees aged 65-80 say they have enough money to live comfortably.
According to some financial planners, a working person who wants to maintain their current lifestyle in retirement should aim to replace 80% of their current income. For example, someone earning $90,000 annually should aim for an annual income of $72,000, or $6,000 monthly. That income can come from anywhere, including Social Security, pensions, annuities, investment interest, rental property, or any other steady source.
For those who fear retirement more than death, a good first step is to review their current household budget and determine how much they’ll likely need to spend in their post-retirement years. Next, they should add how much they want to spend in retirement. If they have hobbies, dream of travel, or hope to turn a hobby into a business, those expenses should be added in.
Once a person has a good sense of their ideal retirement, they should also have a better idea of how much it will take to fund their golden years. That’s the number they want to aim for. In the meantime, some great financial literacy apps can help them gain the knowledge they need to be confident.
As with most things in life, retirement is not a one-size-fits-all affair.
