Why Americans Feel They Cannot Save for the Future
Retirement ranks up there with one of the biggest decisions individuals make throughout their life. Many different factors play into this decision. Financial security, healthcare and lifestyle are often cited as top things to consider before making this leap. Sadly, a large majority of people feel that they are unprepared for retirement and some even have no plans to retire at all. We wanted to look at some of the statistics surrounding this decision, some of the roadblocks individuals are facing and some of the steps people are taking to prepare for retirement.
One commonality we see about retirement across all age categories is that people are looking forward to it. In fact, 7 in 10 workers feel this way. The reality of that situation is unfortunately a little more bleak. A study by the National Institute for Retirement Studies found that 56% of Americans feel that it is going to be harder to prepare for retirement in the future than it is today. The rising cost of healthcare and long-term care, stagnant salaries, increasing debt, fewer pensions and ‘do-it-yourself’ retirement plans are all cited as reasons for this belief. So, what are people doing to combat this? We’ve already established in previous posts that there is an upward trend of people working past age 65 in order to secure a more financially stable retirement. Not surprisingly, one thing we often see, and probably the most common form of retirement preparation, is putting money away into some sort of retirement account.
Historically, employers played a significant role in retirement by providing employees with a Defined Benefit pension. These plans worked as retirement accounts with a lump sum payout or scheduled payments based on tenure, earning history and other aspects. These types of plans are no longer as common as they once were and oftentimes, aren’t even an option for most people. Due to this shift, individuals are faced with putting away savings on their own. Without employers contributing as much, and with sweeping changes to the social security system, 70% of Americans feel they cannot save enough on their own to guarantee a secure retirement. Many people also feel ill-suited to handle this responsibility on their own. 73% of workers say they don’t have the financial skills to manage money in retirement. In addition, 79% say they don’t know enough about investing to ensure savings last through retirement.
Another big step to tackle before retirement, the biggest for many, is figuring out and budgeting for healthcare. For most of an employee’s working career this responsibility fell on the employer. For the average person, navigating Medicare and retiree health insurance seems as dense and confusing as a jungle maze. We know from first-hand experience how daunting a task this can be for new retirees. We’ve found that it’s more so a planning process than a strict decision making process. Currently there are limited resources and organizations like Doctor’s Choice who help people through this transition. We’ve found that through education, personalized planning and advocacy, the guesswork can be taken out of this process. This also presents a huge opportunity for employers to implement strategies at little or no net cost to them to help their retirees through this confusing process.
Another important piece of the retirement puzzle is planning on what to do with all the new found free time. For a lot of people, their job is also closely tied to identity and many people find it hard to stay engaged in retirement. That is not to say that people are unhappy in retirement as most generally are. However, in a study conducted by the Center for Retirement Research at Boston College, several key factors play into this. One factor is whether an individual retired voluntarily (retired on their own accord) or involuntarily (lost their job). Involuntary retirement had a significant impact on overall welfare in retirement. In addition, health also played a big role in this welfare mark. People in poor health are generally more dissatisfied with retirement compared to those in good or average health. These two factors also tie in with the amount of money saved and available for retirement. Not surprisingly, those who have decreased income are less satisfied with retirement. Some of the most common goals in retirement for individuals are: traveling, spending more time with family and friends, and pursuing hobbies. It’s clear that adequate planning and saving are crucial to achieving these goals in retirement.
Next week we’ll be covering a new trend that is gaining popularity among both employers and their tenured workforce--phased retirement. And if you’d like to learn more about best-practices for retirement healthcare, feel free to follow our posts here on LinkedIn.
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About Doctor’s Choice:
Doctor’s Choice is the premier service advocate for Medicare, making healthcare transitions easy for employers and their employees. Founded by a Brown University-trained Physician, they deliver best-in-class service to seniors before, during and after their transition to Medicare. Offering coverage across the country and tech-enabled personalized guidance through their Turbo Medicare Roadmap, Doctor’s Choice provides concierge-level service and healthcare advocacy to our members for life. For more insights on retirement trends and employer strategies for an aging workforce, follow Doctor’s Choice on LinkedIn @DoctorsChoice, Twitter@DoctorsChoiceU, and Facebook @DoctorsChoiceUSA.