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By: FEDweek StaffAn annual survey of retirement confidence by the Employee Benefit Research Institute has highlighted a mismatch between what current workers expect of retirement and what retirees are experiencing.
For example, the survey found that the median age at which current workers expect to retire is 65, and that they expect to start withdrawing Social Security benefits at that point. “Retirees, on the other hand, report retiring at a significantly lower age than workers anticipate. Most retirees, 7 in 10, report retiring earlier than age 65, with a median retirement age of 62,” said a summary
“Also contradicting workers’ expectations, retirees report collecting Social Security later into their retirement but earlier than workers’ expectations at around age 64. Similar to last year, half of retirees say they retired earlier than expected. While 2 in 5 retirees who retired early say they did so because they could afford to, nearly 7 in 10 retirees indicate the reason was out of their control,” the summary said.
Also, while only 35 percent of workers expect Social Security to be a “major” part of their retirement finances, 62 percent of retirees say it is that significant in their finances.
On retirement confidence, the survey found a slight rebound from the drop that occurred in 2023, with concerns about inflation still the most significant drag; lack of savings was the next most-cited reason for lack of confidence.
On the positive side, “While half of retirees say their overall expenses in retirement are higher than they originally expected, nearly 4 in 5 say they are able to spend money how they want within reason. Despite higher than-expected costs, significantly more retirees this year, 3 in 10, believe their overall lifestyle in retirement is better than expected. Additionally, over two-thirds of retirees agree they are having the retirement lifestyle they envisioned.”
So What Can You Do? Plan
Comprehensive planning is your best bet for aligning expectations with experiences in retirement. Start by setting clear, realistic goals for your retirement lifestyle, considering factors such as desired living conditions, travel, hobbies, and healthcare needs.
Create a detailed financial plan that includes projected income from your FERS or CSRS pension, Social Security, TSP, investments, and other savings necessary to support these goals. (By the way, just because you have a TSP does not mean you can’t also have an IRA, or two – but keep in mind some key differences.)
Regularly review and update this plan to reflect any changes in personal circumstances or financial markets. Consider tax implications of where you live and may want to move to – some states are more advantageous to federal retirees.
Also, seek out advice from financial planners – especially fiduciaries – that provide professional insights and help you adjust your strategies as needed.
By maintaining a proactive approach and staying informed about your financial situation, you can create a more predictable and satisfying retirement experience.
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