More American savers will turn 65 this year than at any point in history, with roughly 12,000 people a day reaching the age that most target for retirement, but a new report suggests that many are second-guessing whether they are ready to retire.
The Nationwide Retirement Institute surveyed 1,000 U.S. consumers ages 60-65 about their concerns, expectations and lessons learned for retirement planning. It found that a third of current retirees in this age range are considering returning to work, with half (50%) citing the fear of running out of money or currently running out of money as their top reason for doing so.
Not surprisingly, survey respondents say the biggest threat to their retirement security is inflation at 90%, followed by cuts to Social Security benefits (84%) and cuts to Medicare/Medicaid benefits (83%).
Moreover, Nationwide found that there is a significant gap between the realities of current retirees and the expectations of adults ages 60-65 who are still working. These include:
Unrealistic estimates about basic living expenses. Current workers underestimate the percentage of income they'll spend on basic living expenses in retirement. They expect to spend 42% of their income on food, housing, and other basic expenses, while retirees actually spend 53% on those expenses.
Lower retirement security than anticipated. 77% of respondents who are currently working say they expect to be comfortable in retirement, while only 68% of current retirees actually feel comfortable.
Retiring ahead of schedule. Nearly two-thirds (64%) of current retirees stopped working earlier than planned, which can reduce important years to save for retirement. The average age of retirement was 60, while the average age of expected retirement was 67.
Safety net shortfall. More than a third (36%) of retirees said they received less in Social Security benefits than they expected. If Congress does not take action, future retirees can expect a 23% cut in benefits, according to the Social Security Administration. Nearly three-fourths (74%) of current retirees said this cut would impact their retirement "a lot," with 71% of those still working saying the same. Only 41% of survey respondents expect Social Security to exist in its current form throughout their retirement.
Advice to Younger Selves
When asked what advice they would give their younger selves about retirement planning, many had words of wisdom to pass down, emphasizing the difference between what they expected and what they experienced.
Almost a quarter of survey respondents (23%) said to expect you'll need more money than you think.
Nearly 1 in 5 (18%) said not to assume you can work for as long as you'd like.
The vast majority gave tried-and-true advice, including start saving early (63%), start planning early (41%), and don't live above your means (34%).
Retirees, meanwhile, cited working with a financial professional, saving early, maxing out retirement plan contributions and retirement plan auto increases as actions that most helped their retirement security.
Not surprisingly, bad investments, extravagant purchases, tapping retirement savings early and waiting until after age 30 to start saving were cited as actions that most harmed their retirement security.
“These words of advice from those who have reached retirement provide great points of reference for American savers at every stage of the retirement planning journey,” stated John Carter, President and COO of Nationwide Financial. “As American workers prepare for their retirement years, which could be sooner than anticipated and last longer than they may expect, it's crucial that they lean on the guidance of financial professionals who can help them make the right financial decisions and avoid costly mistakes."
Leave It to the Pros
The survey findings further reveal that not enough people are drawing on professional resources. Less than 4 in 10 (37%) respondents get information about retirement planning from a financial advisor. Others rely on a mix of sources, including the internet (39%), friends and family (35%) and resources from their employer-sponsored retirement plan (31%).
This reluctance to seek professional guidance poses a significant threat to long-term financial well-being and can lead to uninformed decisions that have lifelong consequences, the survey report further emphasizes. For example, nearly 6 in 10 retirees (58%) opted to draw down Social Security before their retirement age and 34% accessed their retirement savings early. What’s more, nearly 1 in 5 (17%) took a loan from their 401(k)s, risking tax and other withdrawal penalties.
“One of the most crucial tasks of our time is to ensure American workers understand how everyday choices impact their financial futures,” added Carter. “It's important for those preparing for retirement to have a holistic plan, addressing factors like the right time to take Social Security, costs of healthcare and long-term care and ways to ensure they don't outlive their income.”
Edelman Data and Intelligence (DXI) conducted the nationally representative online survey of 1,000 U.S. residents aged 60-65 on behalf of Nationwide from Nov. 2–29, 2023.
