Bolstered by fixed, defined-benefit pensions and Medicare, the “Greatest Generation” often had the luxury of leaving the workforce with a decent nest egg.
But things have changed dramatically for Americans over the past few decades. The forced saving of defined pensions are rarely offered by employers. Instead, strictly voluntary 401(k)-type plans are the standard retirement plan.
Then there’s the evaporation of home equity that took place after the 2007-2009 meltdown and recession. The idea of a home as a piggy bank was broken in a big way as homeowners lost trillions in home values.
Where are we today? Millions can’t afford to retire the way their parents did. Healthcare is a concern as out-of-pocket costs keep climbing. You may even be paying off student loans in your seventh decade. People are also living longer, which compounds the need to save more and work longer.
“Retirement is no longer associated with a gold watch and metaphoric sunsets. Today’s workers expect to extend their working lives beyond age 65. Their vision of retirement balances continued work with freedom and more time to pursue personal interests,” said Catherine Collinson, CEO of Transamerica Institute. In a recent study, the institute found that:
- Fifty-five percent of workers plan to work after they retire, including 41 percent who plan to work part time and 14 percent full time.
- Among workers planning to work in retirement and/or past age 65, most plan to do so for financial reasons (80 percent) and almost as many for healthy-aging reasons (72 percent).
- Forty-four percent of workers envision a phased transition into retirement during which they will reduce work hours with more leisure time to enjoy life (27 percent), or work in a different capacity that is less demanding and/or brings greater personal satisfaction (17 percent).
- Another 22 percent plan to continue working as long as possible until they cannot work anymore.
- The most often cited retirement dreams are traveling (67 percent), spending more time with family and friends (57 percent), and pursuing hobbies (48 percent).
- Thirty percent of workers dream of doing some form of paid work such as pursuing an encore career (13 percent), starting a business (13 percent), and/or continuing to work in the same field (11 percent). Twenty-six percent dream of doing volunteer work.
How do you prepare for a time in which you’ll need both flexibility and a heftier nest egg? Contributing more to your IRA and 401(k) is a natural start.
It’s also important to avoid any situations that would derail your retirement savings, Having an emergency savings account is a good idea. That way way you’ll avoid dipping into your 401(k) plan for loans or withdrawals.
Most importantly, having a plan is the bedrock of a comfortable retirement. Plan to save at least 15% of your annual income. Try to avoid debt. Pay off your bills every month with current income. That way you can get on the right road and dodge a lot of potholes later on.
Forbes Article: https://www.forbes.com/sites/johnwasik/2019/04/15/how-do-you-define-retirement/#1a46a2fe46ee