Not Confident About Retirement Despite Financial Success?
You’re not alone. Uncertainty related to interest rates, government debt, long-term care and market volatility is making everyone uneasy. What can you do about it?
Many Americans think they will never retire because they fear they haven’t saved enough. But let’s suppose you are not the average American wage earner or saver.
Let’s assume that, like many people who read this publication, you’re financially successful. You’ve been a hard worker and diligent saver all your professional life, and you deserve a fulfilling retirement. You have planned well for it and want to maximize it.
When most people meet you, they would say you appear to have it all together. You’ve probably worked with a financial professional for a good number of years. You’ve had productive discussions about your risk tolerance and investment returns.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Perhaps you’ve saved $1 million or more if you’re fairly close to retirement. Or maybe you’re about halfway there, which would still put you among a small percentage of Americans who have saved that much. Only 17.6% of individuals age 65 and above have retirement savings of $700,000 or more, according to the Employee Benefit Research Institute.
But like many who seem on track toward a nice retirement, you are not confident about it. While research says you are to be congratulated, and while you should feel good about how hard you’ve worked and how much you’ve saved, you still don’t feel wealthy. Recent data from Northwestern Mutual’s Planning & Progress Study 2023 reveals that even millionaires are worried their savings will fall short in retirement.
So, why don't financially successful people feel more confident about retirement? Here are the primary reasons. All of them are issues you should address with your financial planner.
Uncertainty about the future — inflation and interest rates
Many pre-retirees are pushing back their retirement plans due to factors such as inflation and high interest rates that create more economic uncertainty about the future. The good news is that inflation is much lower than it was in the summer of 2022. But the challenge is taming the last bit of inflation to reach the Fed’s target of 2%.
With mortgage rates high and Americans carrying over $1 trillion in credit card balances, the Fed’s next moves will have big implications for pre-retirees, retirees and the economy. Will they keep raising interest rates to try to lower inflation?
Government debt and the deficit
Out-of-control government spending and overloaded government debt must have consequences on savers and the U.S. economy, but they haven't seemed to yet. But what’s that going to mean in retirement? Fitch downgraded the U.S. government’s credit rating in August.
The most obvious consequence is that the U.S. will have to pay higher interest on future debt, increasing its debt load even more. Since interest payments form a significant percentage of federal expenditures, this may become a bigger issue in the future. Analysts are concerned that the U.S. doesn’t have a plan to rein in its spending and balance its budget in the years to come.
Long-term care costs
Long-term care is a big unknown for many heading into retirement. According to research by the Center for Retirement Research, about 20% of 65-year-olds will not need any long-term care for the rest of their lives, and another one in five will need only minimal support. But 38% are likely to need a moderate amount of care for one to three years. How should you prepare for and pay for expensive care that you may not need?
Stock market volatility
What is my $1 million in savings really worth? The up-and-down of the stock market can make even the most experienced investors uneasy. Some things to keep in mind as you chart options with your adviser:
- Continuing to contribute to your retirement plan, such as 401(k), Roth or traditional IRA, gives you the potential to dollar-cost-average into the market, taking advantage of market dips and eventual recoveries.
- Investors close to retirement may want to increase the “safety” in their portfolios, opting for non-equity-type investments to protect from volatility and minimize the time needed to recover from a market downturn.
Taxes
Even the most diligent savers have big concerns with future taxes as well as with gaps in their planning that may result in taxes that could have been avoided if they more fully understood their options. Like my dad used to tell me, “It’s not how much money you make, it’s how much you keep that matters most.” It’s not how much income you have or how much your investments are worth, it’s how much you’re able to use after tax that counts.
Most people have never even had their previous year’s tax returns analyzed for missed opportunities to lower their taxes and for future opportunities. Most don’t look at the current tax code, the possible tax code to come or where they’re investing their money to consider how those issues affect their tax situation.
Retirement is not as simple to plan for as it was decades ago, when more people had pensions to go with their Social Security and savings. Now, retirement relies mostly on savings. And the question remains for most people, even those who have saved the most and planned the best: “Will it be enough?”
The best way to overcome fears and concerns about retirement is to meet with your financial planner to talk about your personalized plan and address each of the aforementioned reasons that you and so many others aren’t confident.
Dan Dunkin contributed to this article.
Appearances in Kiplinger were obtained through a public relations program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
These materials are for informational purposes only. It is not intended to provide, and should not be relied on for, any tax or legal advice. Please consult a qualified professional before making decisions about your financial situation. Any reduction in taxes would depend on your specific tax situation. The sources are provided strictly as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. When you access one of these websites, you assume total responsibility and risk for your use of the website.
Related Content
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Barry H. Spencer (www.wealthwithnoregrets.com) is a financial educator, author, speaker, industry thought leader, financial advisor, retirement planner and wealth manager who has appeared in Forbes, Kiplinger and other publications. He has also appeared on affiliates of NBC, ABC and CBS and was interviewed by Kevin Harrington, an original panelist on ABC’s hit show “Shark Tank.” Spencer’s latest books include “Build Wealth Like a Shark,” “The Secret of Wealth With No Regrets” and “Retire Abundantly.”
-
Renting Is Cheaper Than Buying in All 50 States. How Does Your City Compare?
Renting is cheaper than buying, according to a new Bankrate survey. In 21 U.S. metros, the monthly cost of owning is at least 50% more expensive than the monthly cost of renting.
By Kathryn Pomroy Published
-
CVS Stock Plunges as Medicare Advantage Costs Spike
CVS Health came up short of Q1 earnings estimates and slashed its full-year outlook as medical costs surged. Here's what you need to know.
By Joey Solitro Published
-
How Non-Traded REITs Could Give Your Roth IRA a Boost
In addition to increasing the diversity of your portfolio, adding a non-traded REIT within your Roth IRA allows the resulting dividends to grow tax-free.
By Edward E. Fernandez Published
-
Tips to Help Single Women Struggling to Save for Retirement
The gender wage gap and taking time away from the workplace for caregiving duties make saving for retirement a bigger challenge for many women.
By Kristi Martin Rodriguez Published
-
A Letter of Wishes: No Legal Power But Powerful Nonetheless
A letter of wishes lets you explain, in plain language, your intent behind your estate documents, potentially heading off any misunderstandings or disputes.
By Steve Lockshin Published
-
If Cars With Touchscreens Are Unsafe at Any Speed, Why Do We Have Them?
Studies show how distracting car touchscreens can be, yet many automakers still use them, perhaps because they’re cheaper to upgrade than physical components.
By H. Dennis Beaver, Esq. Published
-
How to Assess the Impact of Your Charitable Giving
Here are five simple ways to 'do this, not that' when trying to find out from a nonprofit what kind of impact your donations are having.
By Catherine Crystal Foster Published
-
How a Two-Year Installment Sale Strategy Can Save on Taxes
When selling property or another substantially appreciated asset, you could spread the taxes over two years to save big bucks. Following the rules is critical, though.
By Derek A. Miser, Investment Adviser Published
-
Five Ways to Make Retirement a Little Less Scary
To avoid lying awake at night once you’re retired, consider having these strategies in place before you take the plunge.
By Evan T. Beach, CFP®, AWMA® Published
-
With Irrevocable Trusts, It’s All About Who Has Control
An irrevocable trust must be carefully funded, structured and managed to achieve both asset protection and tax planning.
By Rustin Diehl, JD, LLM Published