Retirees’ concerns about not having enough money to last through retirement may not be as grim as they had feared before retiring, according to a new study.
In fact, more than two-thirds of retirees say they live as well or better in retirement as they did when they were working, according to the fourth edition of T. Rowe Price’s study, “Retirement Savings and Spending: Behaviors and Attitudes Toward Retirement.” By comparison, only 39% of current workers believe they will live as well or better in retirement.
The study also found that retirees are generally optimistic about retirement, with 84% agreeing that their retirement has turned out to be just as good as or better than expected, and 80% agreeing that they are enjoying retirement more than their primary working years.
This latest installment of the study looks at current retirees, while the first phase of the fourth installment, released December 2018, focused on current workers.
T. Rowe Price notes that, with more 401(k) plans providing participants with the option of leaving their assets in the plan after their retirement, it’s becoming increasingly important to recognize retirees’ needs and how best to support them.
Explains Aimee DeCamillo, T. Rowe Price’s head of Retirement Plan Services: “Understanding the needs of retirees also provides insight that can help plan sponsors better understand the future priorities of current workers and determine effective plan design strategies and communications plans that will provide the guidance necessary to meet those needs.”
Health Expenses Top Concern
Not surprisingly, the top three spending concerns in retirement all relate to health care. According to the findings, 72% say long-term care services, such as nursing home care, is the top spending concern in retirement, followed by health insurance premiums (64%) and out-of-pocket health care expenses (64%).
This appears to be consistent with the years leading up to retirement. When asked how concerned they were heading into retirement, overall health and the cost of health care were cited as top concerns, followed closely by assets lasting in retirement. Nearly 70% of retirees felt somewhat or very concerned about both their health and the cost of health care, followed by 65% of retirees reporting concerns about their assets lasting.
Yet, despite these concerns, a majority of retirees believe they have enough money to pay for health care — and this belief increases with the number of years spent in retirement. According to the findings, 71% of recent retirees say they have enough money for health care, compared to 81% of those who have been retired for 11 years or more. By comparison, only 46% of current workers believe they will have enough money to pay for health care in retirement.
“This contrast suggests that there is a mini-lifecycle in retirement; the initial anxieties and concerns many people have leading into retirement fade as they move through retirement and they learn to adjust and finally get comfortable with their new lifestyle,” notes Sudipto Banerjee, T. Rowe Price’s senior manager of thought leadership. “It seems that retirement is like any other unknown; the perception of it changes with actual experience.”
The online survey was conducted by NMG Consulting for T. Rowe Price from July 24, 2018 to Aug. 14, 2018. The findings are based on 1,005 current retirees who have a rollover IRA or left-in-plan 401(k) balance, and 3,005 adults age 21 and older who have never retired and are currently contributing to a 401(k) plan or are eligible to contribute and have an account balance of at least $1,000.