For a large number of people approaching retirement, the future looks bleak. Their savings rate is low, their anxiety level is high, and they're not even sure they'll be able to retire at all.
More than one in five adults — 22% — have no retirement savings, according to AARP. Meanwhile, 64% worry they won't have enough money in their later years, and 47% of adults who have not yet retired believe they will need to work at least part-time in retirement for financial reasons, AARP said.
“It is a public health crisis. Many people don't have any retirement savings. People feel bad – that they haven't done enough – and say, “There's nothing I can do about it.” “They're putting their heads in the sand and trying not to think about it,” said Mary Liz Burns, director of communications strategy at AARP.
To raise awareness and hopefully reverse this trend, AARP, the lobbying group that focuses on issues facing seniors, launched a public service campaign with the Ad Council called “This Is Retirement.” Burns said the campaign targets people who may feel invisible as they grapple with the stress of financing retirement.
“The average American has a hard time saving. They're not alone, there are many, many people in the same situation,” Burns said. “There's no judgment for what you did or didn't do.”
The multi-year “Pre-Retirement” campaign began in November and will continue to roll out to more markets and media including TV, radio and social media.
Advertisements encourage retirees to face the difficult aspects of saving for retirement. There is also a website, ThisIsPretirement.org, that offers free tips, resources, and tools. Nearby retirees can take a test and get a recommended business plan.
“Think about actions you take that could hurt you, such as carrying over credit card debt each month. Think about steps you can take to get started,” Burns said.
“Start somewhere. Anything is better than being frozen.”
where do I start?
First, experts say you should create a budget that includes your income and all your expenses. You can do this on your own or with a financial advisor.
“Make sure you have a plan. If you don't plan, you won't have a successful retirement,” said David Schneider, founder of Schneider Wealth Strategies.
J.B. Beckett, founder of Beckett Financial Group, suggests working with a financial advisor who can examine your tax strategies, insurance coverage, Social Security strategy and health care expenses with an eye on longevity and the unknowns.
Retirement can last a long time, noted Joel Russo, founder of NJ Retirement Planning. “Age these days can be over 100 years old. People think retirement won’t be long, but it could last 30 years or more. It’s difficult to finance that without a comprehensive plan,” he said.
Advisors need to look at the client's complete situation to find out the reasons why a person may not be saving enough money.
“People aren't saving enough. But why aren't they saving enough? What else is happening to them that they can't do? Getting an overview of your budget and expenses can show you where your money is going,” Russo said.
Catch up on contributions
“Your 50s are a really important time to get really serious,” Schneider said. “Hide and be serious. Every investment should be prudent and diversified. Increase any savings, if possible. Make catch-up contributions, if possible.”
Starting at age 50, you can make additional investments called catch-up contributions to IRAs and Individual Retirement Accounts. In 2024, the maximum 401(k) contribution will be $23,000, but catch-up contributions will allow you to save an additional $7,500. For IRAs, the maximum contribution is $7,000, with a catch-up contribution of $1,000.
Check with Social Security
While you're working on your long-term plan, get your Social Security statement from SSA.gov and check for errors. This will allow you to make sure you get credit for all your work over the years and know where you stand with Social Security benefits, Schneider said.
Since the last 10 to 15 years of your career are often peak earnings years, Pickett said you should take advantage of savings opportunities to maximize your retirement efforts and minimize your expenses.
“You enter the retirement red zone in the last 10 to 15 years. If you don't save enough, [then] “Cut back expenses and save as much as you can,” he said. “Be careful not to spend too much. Don't celebrate and buy a car when you get a promotion and end up paying $1,000 for the car. Use that extra money to throw away more money. Use science and math when it comes to money. Don't get emotional about money.”
It's also important to prepare for the cost of long-term care.
“The only thing that can erode estates is long-term care,” said Eric Bond, wealth manager at Bond Wealth Management. “You may have $300,000 for long-term care, but this has to be $500,000. It's the most unexciting thing in the world to plan, but you have to do it.”
Earn more, save more
You can also consider leveraging your experience and skills to get a higher-paying job that can help you close this savings gap, Bond said.
“The best way to save more is to earn more. Try to make as much money as you can. Your job is to get another job that pays more,” he said. “In the past, pensions kept people in companies longer. But now you can't rely on a company that way.
Demand for retirement savings
“Just try to save a little extra,” Bond said. “If you find you're only eating macaroni and cheese, cut back.”
Bond also cautions against borrowing or taking out a mortgage to finance your children's college education.
“They can get an equally good job from a state school. College is college. Unless.” [they’re] You're going to be a doctor, a lawyer, an engineer – okay. But don't sell your house or downsize to pay for college, Bond said.
Being open to continuing to work — even part-time or consulting work — can help you stretch your retirement nest egg. Working in your retirement years, if you're healthy enough to do so, can provide not only extra income, but also routine and stimulation, which can be crucial for mental health.
Ultimately, your retirement will likely be funded by your own savings and investments. So stay away as much as possible.
“You only get one chance to retire,” Pickett said. “There is a retirement crisis out there. People need to save more, and save more than they think.”
