5 Shocking Retirement Statistics (and How to Prepare Accordingly)

Retirement statistics tend to paint a dismal picture for those nearing their golden years. While this data isn’t meant to discourage you, it can help you make better decisions when it comes to your financial future.

If you’re worried you may not be adequately prepared for retirement, you’re not alone. According to recent data from the Natixis Global Retirement Index, 59% of Americans said they accept that they’ll have to keep working longer than they originally thought. And 36% now believe they’ll never have enough money to retire.

Indeed, the Covid-19 pandemic set many Americans back on their path to financial freedom. Yet the state of retirement readiness in the United States has long been precarious. The good news is it’s still possible to retire comfortably with proper planning. In this article, we’re sharing five shocking retirement statistics—and how you can use this data to strengthen your own retirement plan.

Consider these five retirement statistics when planning your future:

#1: 45% of Baby Boomers Have No Retirement Savings

According to data from the Insured Retirement Institute (IRI) in 2019, about 45% of Boomers reported having no retirement savings. But that doesn’t mean they’ve never saved for retirement. The IRI survey found that about half of those with no savings had money set aside previously. Unfortunately, they had to draw on those savings prior to retirement.

What does this mean for current savers? The best way to avoid draining your retirement funds prematurely is to have an emergency fund. A cash reserve can help cover unexpected expenses and financial setbacks, so you don’t have to dip into other savings. A standard rule of thumb is to have at least three to six months’ worth of expenses set aside. However, you may want to aim higher depending on your circumstances and lifestyle.

#2: Four in Five Older Americans Lack a Basic Understanding of Personal Financial Planning

The American College of Financial Services’ 2020 Retirement Income Literacy Survey revealed that the vast majority of older Americans don’t know how to plan for a successful retirement. Those surveyed lacked a basic understanding of how to invest their savings. They also had no idea about their income and long-term care needs in retirement.

However, those who had a written financial plan said they felt more prepared to navigate the pandemic than those without a plan. In fact, a separate study from Schwab found that 54% of people with a written financial plan felt “very confident” they would reach their financial goals, compared with only 18% of non-planners.

The takeaway here is clear. If you don’t have a written financial plan, consider working with a trusted financial advisor to develop one.

#3: 45% of Baby Boomers Say Debt in Retirement Is Acceptable

According to a recent survey from Ameriprise, 45% of Boomers say it’s okay to retire in debt. And nearly one-third of current retirees are paying off some type of loan (not including mortgages). Meanwhile, only 37% of Millennials and 40% of Gen-Xers believe it’s okay to still be paying off debt after retiring.

Most financial professionals agree that going into retirement in debt can be risky. If you’re nearing retirement and still have a mortgage, consider refinancing to lock in a lower rate. In addition, try to knock out high-interest balances like credit card debt and student loans before you stop working.

With healthcare costs on the rise and lifespans increasing, preserving your financial resources is essential. Unfortunately, paying off debt in retirement can quickly diminish them.

#4: A Healthy 65-Year-Old Couple Can Expect to Pay Over $650,000 Towards Healthcare in Retirement

Healthcare is one of the biggest expenses retirees face, and costs continue to rise. According to HealthView Services’ 2021 Retirement Healthcare Costs Data Report, total projected lifetime healthcare costs for a healthy 65-year-old couple retiring in 2021 are expected to be  $662,156. If the same couple were to start taking Social Security at age 65, healthcare expenses would consume 68% of their benefits.

The report also states that projected lifetime healthcare expenses can exceed $1 million in some cases, depending on where you live, your insurance coverage, and whether you have chronic health conditions.

These healthcare costs in retirement statistics underscore the importance of planning early. Medicare doesn’t cover certain healthcare expenses, including the cost of long-term care. In some cases, purchasing additional insurance coverage may be appropriate to offset the rising cost of healthcare in retirement. Alternatively, you may want to adjust your savings targets to account for your potential healthcare needs.

#5: About 40% of American Workers Say They Don’t Know Who to Turn to For Retirement Planning Advice

The Employee Benefit Research Institute’s 2021 Retirement Confidence Survey reveals that a significant portion of pre-retirees can’t prioritize retirement planning because of other, more pressing financial needs. For example, four in 10 workers say that saving for or paying off a child’s college education reduces the amount they can save for retirement. Meanwhile, another four in 10 say that debt is affecting their ability to save.

Indeed, most households have a variety of financial needs and goals. But what’s most shocking about these retirement statistics is that 40% of pre-retirees say they don’t know who to ask for advice when it comes to financial and retirement planning.

Don’t Let Retirement Statistics Discourage You

Working with a trusted financial advisor like Milestone Asset Management Group can help ensure you’re prioritizing your objectives appropriately. In addition, we can help you develop a savings and investment plan that keeps you on track towards your retirement goals.

Ready to get your retirement plans on track? We encourage you to schedule a call to see if we may be a good fit.