Retirement Planning

Posted by Kerry Hannon.
When I write and speak about retirement planning, I often harp on my concerns that people will outlive their money in their retirement years.
And I admit I feel a certain anxiety about how those years will play out for me as well. But a recent TIAA survey brings to light a brighter picture, and I thought I should share it with you.
The report, a follow-up to a 1982 study, reveals nearly universal satisfaction in retirement (93 percent) among its retired plan participants. The 2016 follow-up of more than 1,500 retired plan participants measures the evolving attitudes toward life in retirement – providing insights into all sides of retired life and the steps taken to prepare.
“Our findings show that a happy, fulfilling retirement is still attainable,” said Roger W. Ferguson, Jr., president and CEO at TIAA. In fact, the intensity of satisfaction among TIAA retirees has increased: 65 percent of today’s retirees say they are very satisfied with retirement, up from 51 percent in 1982.
One trend that I found interesting: In 1982, 39 percent of TIAA plan participants retired before age 65. Among the retirees surveyed in 2016, more than half (54 percent) retired before age 65. And many individuals are retiring ahead of their own schedule: 71 percent of today’s retirees say they had expected to work until age 65 or older, but only 47 percent did.
Interestingly, the majority retired on their own terms: 76 percent of those surveyed in 2016 report that they retired by choice, an increase from 67 percent in 1982. The most popular reason for retiring was simply the feeling that it was “time” (cited by 46 percent of respondents, with 19 percent saying that was the most important reason.)
That said, as I advise, one factor that undeniably makes retirement fulfilling is getting an early start to retirement planning. It did not surprise me that among today’s retirees, those who began retirement planning before age 30 are more likely to retire before age 60, according to the survey. And the majority (75 percent) of these early planners say they are “very satisfied” with their retirement. However, it’s never too late to begin planning – the survey also shows that 60 percent of those who started to plan financially for retirement after age 50 also are “very satisfied” with their retirement.
Another advantage of survey respondents’ planning is they have had to make marginal changes to their lifestyles in retirement. A majority (54 percent) of those surveyed said they have not needed to make any financial adjustments to their lifestyle, and another 20 percent said they have only made minor changes. Those who said they did have to make financial adjustments focused most on buying fewer clothes and accessories (59 percent), traveling less (52 percent) and eating or dining out less frequently (43 percent).
As cheerful as all this news is, I would be remiss if I did not pull out the disparities between men and women that the survey identified, and why for women preparing for retirement and ramping up your financial literacy is critical at all ages.
  • Women are twice as likely to say that their biggest concern in retirement is running out of money (29 percent vs. 15 percent) and they are more concerned about being lonely (19 percent vs. 11 percent).
  • Women face a number of unique challenges before and during retirement. Longer life expectancies, lower average wages and more time out of the workforce due to care giving can undermine their savings.
  • Men tend to start planning for retirement earlier than women. Overall, 22 percent of men stated that they began planning before the age of 30, versus only 12 percent of women.
  • When asked what they would have done differently to prepare for retirement, women pointed to a number of financial factors, including understanding Social Security options (21 percent vs. 16 percent of men), understanding other sources of income (29 percent vs. 18 percent of men), managing savings and investments (32 percent vs. 26 percent of men) and maximizing employer retirement and benefit options (26 percent vs. 14 percent of men).
  • Men were slightly more likely to find the transition to retirement easy compared to women (77 percent vs. 69 percent).
  • More men (58 percent) were very satisfied with their financial health than women (46 percent).
  • Women in retirement were also more likely than men to volunteer (58 percent vs. 42 percent), care for family members (43 percent vs. 26 percent) and participate in religious activity (36 percent vs. 25 percent).

Finally, here are two of my top tips for managing a successful transition to retirement:
Ease into retirement. Fuse a life of consulting, volunteering and leisure time. It’s a trifecta–paid work, giving back and relaxation. A growing number of retirees are seeking a similar balance. It’s deliberate in figuring out what’s next — realizing they gain from some work structure and want to build social connection, mental engagement and meaning into their life.
Even after stepping away from a full-time job, for many of us work is still our primary identity. It’s an important part of how we define ourselves, and we don’t want to totally give it up. It can make us feel valued and relevant, as well as provide a safety net, or slush fund, to put toward extras we want in our lives without dipping into our retirement plans.
That said, we want to create our own hours and have time for other things that matter to us such as volunteering, travel and family. This concept of phasing into retirement ties in with a strong theme that emerged from the survey interviews with TIAA retirees– the need to discover activities in retirement to fill the void left by work. Staying busy and engaged during retirement is key to a satisfying retirement.
If you have a partner, plan together. “Are you saving enough for retirement?” is the key question that everyone focuses on, but beyond money, couples should be discussing and creating a “shared vision” for this stage of life. These are some questions to consider together:
  • How will your roles and responsibilities change?
  • How much togetherness and separateness does each of you want and need?
  • What about physical space in the home?
  • What health and medical considerations need to be factored into decision making?
  • Where to live: geographic location, proximity to family, climate, what is the importance of nature, culture, and other preferences? What about social life, friends, and community?
  • What responsibilities and obligations do you have for adult children, aging parents, and grandchildren or other relatives and friends?
  • How can you live a fulfilling life with purpose and meaning?
Revisit your “shared vision” once a year. It’s a little like re-balancing your investment portfolio at regular intervals.
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July 12, 2016