America’s Retirees Facing Daunting Challenges

by Sally Keys | July 29 2017 

Photo by Neill Kumar on Unsplash

Can You Afford to Retire?

Around 49% of older Americans simply cannot afford to retire. They believe the only answer is to delay retirement and carry on working as long as possible. In fact, Americans have never been more worried about their finances, according to a survey by analytics company Gallup. And it’s their retirement fund they worry about the most. The reality is that not everyone in America is able to save enough for retirement. Around 55 million Americans are without any access to savings through their workplace. Furthermore, the Trump administration’s action against state auto-IRA programs recently, makes it an even harder problem to solve.

So how bad is America’s retirement landscape?

The truth is, it’s not a good time to be a pre-retiree in America. Saving for the future has long been something that Americans struggle with. But as life expectancy increases and savings needing to last longer, it’s beginning to catch up with them us. In fact, the average couple has only put away around $5,000 for retirement. Those nearest to retirement have the least amount of money saved than any other age group. Those over 60 had about $50,000 saved up. Meanwhile, people 55 to 59 had three times as much, a survey by Wells Fargo discovered.

Financial worries of pre-retirees

As the countdown to retirements begins, many people’s financial worries overshadow what should be a time to look forward to. Can they survive on a limited fixed income? What costs lie ahead? What if their health deteriorates? Pre-retirees face a lot of financial uncertainty as they approach retirement and some significant concerns. Some of these include:

Unforeseen expenses

We can of course plan for the known. The costs that we know will come our way. But many people struggle to prepare for the unknown, unpredictable costs. Perhaps it’s major repair work to the home, or an unexpected illness or the death of a partner. These can all be incredibly stressful at any time of life. But when close to giving up the security of a regular and reliable paycheck, it can become even more devastating.

Increasing health costs

For those approaching their retirement, now is the time to think more seriously about health-care costs. After all, expenses and deductibles could eat away at your savings pretty quickly. Last year a man aged 65 would likely need around $72,000 to cover health care expenses post retirement. Meanwhile, a woman of the same age would require $93,000. But as each administration changes, so do the government policies and priorities on issues like health care benefits. Therefore, it becomes impossible to plan effectively for potential future medical expenses.

The security of long-term social security

For Baby Boomers, Social Security and pensions no longer guarantee financial security during retirement. Social Security benefits once provided much needed income support for seniors, especially those with a limited income. But now, the amount of these benefits has reduced considerably. This is blamed on the growing number of people now claiming benefits.

Debt repayments

Those pre-retirees who are also homeowners must continue with their debt and mortgage repayments, despite becoming reliant on a reduced, fixed income. They will need to find a way to continue paying higher mortgages on their new, more limited income. And with fluctuating housing markets, they may see the equity in their property rise and fall every few years.

Keeping up with the rising cost of living

Despite the cost of living and inflation rising, things like Social Security benefits and salaries do not. Therefore, trying to keep up with increased costs while on a fixed retirement budget can really impact a retiree. For those wanting the same lifestyle as before retirement, inflation means 60% will outlive their retirement savings. Pre-retirees must factor in an annual inflation rate of around 3% to guarantee that they don’t outlive their retirement funds.

Dealing with end of life planning

There aren’t many tasks that are as stressful and depressing as planning your own end of life expenses. Especially trying to get to grips with organizing your finances for after your death. Dealing with this as early as possible can help reduce some stress later on when it becomes more urgent. Preparation is key and having certain steps in place will ease the burden on surviving family members.

What’s the solution?

There are many decisions to make when it comes to retirement planning, especially if it’s not too far away. The changing political landscape also makes it harder to try to predict how things will be in the future. But whether you decide to carry on working for longer, cut down your hours or give up work entirely, the key to avoiding unnecessary stress is good planning and seeking quality advice.


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