George Foreman once said of retirement, “The question isn’t at what age I want to retire, it’s what income.” There’s some wisdom here. Retirement comes in all shapes and sizes, and for many folks, the widely-accepted age of 65 just doesn’t fit.
But before you retire, no matter what your preferences are on the size of your nest egg or your age, you should take a look at these lesser-known facts about retirement. They may just give you some new insight on your personal retirement plan.
Don’t Overestimate Social Security:
Reports from the Social Security Administration (“SSA”) indicate that most elderly beneficiaries get 50% or more of their income from Social Security (“SS”). About 20% of married retirees and almost 45% of unmarried retirees get 90% or more of their income from this benefit. So, what does that look like?
- The average monthly retirement benefit is roughly $1,371, or $16,452 per year.
- The maximum monthly benefit in 2017 is just $2,687, or roughly $32,000 per year for those retiring at full retirement age.
- Benefits are sometimes increased to account for inflation. The most recent increase will take effect in 2018, and is 2%.
- If you delay retirement to age 70, by 2017’s numbers, you can collect monthly checks as large as $3,538, of $42,456 per year. But, this may not always make financial sense in the long run.
But fear not, and don’t these statistics get you down. Social Security was meant to be a safety net, not a retirement plan. With some foresight and prudent planning, these benefits will simply supplement your retirement income.
Are You Prepared, or Underprepared for Retirement?
A 2016 Retirement Confidence Survey reported that about 26% of respondents had less than $1,000 saved for retirement, excluding pensions and home values. About 38% had more than $1,000, but less than $50,000 set aside. For the remainder of folks, 10% had between $50,000 and $100,000, 12% had between $100,000 and $250,000, and 14% had $250,000 or more.
But, more than half (63%) of respondents reported that they are actively saving for retirement. Let’s delve deeper into how retirement saving currently looks:
- Fidelity Investments reports that close to a fifth of workers don’t seem to be contributing enough to their 401(k) accounts to get the full match offered by their employers. This is unfortunate since your company’s match is free money.
- The average 401(k) balance as of mid-2017, according to Fidelity, was $97,700, while the average IRA account balance rose to six figures at $100,200. These are promising statistics.
You Might Be Around for Awhile
Americans are living longer, even though we don’t have the longest life expectancy averages in the developed world. America has about 72,000 centenarians, or people aged 100 or older. Some additional stats on aging round out this picture:
- If you believe most people work until age 65, you’re wrong. Today, the average retirement age is 63. From where I stand, this is a great time to retire and make the most of the sweet years of your 60s.
- Assume that you live to 90. If you retire at 63, your retirement income must last 27 years. This isn’t a crazy scenario. About one in four 65-year-olds today will live past age 90, and one in 10 will live past age 95, according to the SSA.
- Because of our increased longevity, financial commentator Suze Orman recently proclaimed that no one should retire before age 70. I disagree. Assuming you have saved enough to live the retirement life that you want to live, there is no need to work until you may not be able to enjoy your retirement.
Retirement Can Be Full of Surprises
Perhaps the biggest surprise could be your actual retirement date. The 2016 Retirement Confidence Survey reported that 46% of retirees left the workforce earlier than they had planned. Why? About 55% said the reason was disability or other health issues. Another 24% cited changes in their workplace, such as a downsizing or a company closure.
Speaking of surprises, don’t let Medicare enrollment pass you by. It could cost you. For instance, Part B premiums can rise by 10% for each year that you were eligible but did not enroll in Medicare. Take a look at this in-depth review of the ins-and-outs of Medicare to learn more.
And, finally, and in my book, most importantly, is the issue of happiness. In 2014, a survey by MassMutual indicated that 10% of retirees had, to their own surprise, found themselves bored, lonely, and lacking a sense of purpose in retirement. Conversely, 72% reported that they were either quite happy or extremely happy in retirement.
If you ask me, happiness in retirement (at any age) comes down to core pursuits, which I discuss in my book, You Can Retire Sooner Than You Think. Our core pursuits are the things that we do that we love, that give us joy. The more we have, the merrier we are.
No surprise there.