Fixed Income

How Pre-Retirees and Retirees View the Future

BY Anne Johnson TIMESeptember 23, 2022 PRINT

When thinking about retirement, it all comes down to finances. After all, there’s a particular lifestyle that people have become accustomed to. A lot of emotional and financial planning goes into retirement.

Most baby boomers are already there. So, how’s retirement for them? And what about the Generation X group? They’re planning retirement. How are their finances, and what do they need to do?

How Retirement Has Been Traditionally Financed

Many financial advisors previously recommended the three-legged stool approach when planning for retirement: Social Security, pensions, and personal savings. Pensions have since been replaced by 401(k) plans and individual retirement accounts (IRAs).

But the basic theory on how to finance retirement is still intact. The one question mark in the minds of many pre-retirees is Social Security. Will Social Security be around in the next 10 years when these pre-retirees need it? Will the traditional three-legged stool hold up?

Who’s Dependent on Social Security?

In 2022, more than 47 million Americans will receive Social Security retirement benefits. This comes down to $80 billion in benefits. It’s a significant source of income for many retired Americans. But for many, it’s not the only source of income.

For 37 percent of retired men and 42 percent of retired women, more than half of their income comes from Social Security. The rest comes from retirement funds, savings, or work.

But even though they have other sources, Social Security is a significant portion of their livelihood.

Others are even more dependent on Social Security. For instance, 12 percent of men and 15 percent of women rely on Social Security for 90 percent or more of their income.

Today’s pre-retirees and retirees have challenges ahead when it comes to financial security. But who are these retirees, and what are they doing to prepare?

Generation X—Today’s Pre-Retirees

This cohort, born between 1965 and 1985, are in their forties and fifties, and they’re thinking about retirement. This is a resilient generation. They were latch-key kids and survived MTV. They’re also surviving parents and children.

Generation X is often referred to as the “sandwich generation,” because they are between baby boomers and millennials. And as a result, Gen X often finds themselves caring for both aging parents and children.

With high debt and ongoing expenses, planning for retirement is a cause of anxiety for many Gen Xers. Fifty-nine percent of generation X were concerned they wouldn’t be able to have a financially secure retirement, according to a survey by the National Institute on Retirement Security.

Generation X is a financially savvy group, according to an Investopedia survey. Almost 80 percent of these pre-retirees have an intermediate or advanced understanding of finance. And they expect Social Security and 401(k)s to be their primary sources of retirement income.

But with adult children coming home, parents moving in, high inflation, and stock market volatility, these pre-retirees seem a little more pessimistic than current retirees.

Most Retired Baby Boomers Comfortable

Born between 1946 and 1964, baby boomers dominated the workforce for decades. But as they have aged, they’re now dominating retirement. Many baby boomers have been enjoying retirement for several years.

Current retirees are optimistic. Whereas 64 percent of pre-retirees are concerned about stock market volatility, only around 49 percent of current retirees are concerned, according to a Kiplinger survey.

Around 70 percent in the survey said they expect to live comfortably on their income. Sixty-six percent said they would not run out of money.

But in the same survey, less than 55 percent of pre-retirees thought they would not run out of money.

Part of the discrepancy might come down to planning, but retirement age is also a factor.

Retirement Age a Factor

The retirement age is rising. Americans are staying in the workforce longer. In 1992, for example, the average retirement age for men was 62; in 2021, it was 65. Women’s retirement age has risen, too. Fifty-nine was the average age in 1992 for women, but it rose to 62 in 2021. COVID-19 interrupted the trend slightly in 2021. Workers took the opportunity to retire a little sooner to avoid the shutdown.

Despite the COVID-19 disruption, Americans are working longer—and it’s partly because of financial concerns.

The average monthly Social Security retirement check is $1,672.76. That doesn’t go far when considering that the median monthly mortgage in the United States is $1,100. So there’s not much left for living expenses, let alone any niceties of life.

Americans are working longer to continue paying into 401 (k) plans and sock more money away in savings. Many start collecting benefits, but continue to work. They must supplement their Social Security benefits.

Social Security and Medicare Viability

The pre-retirees and the retirees have something in common, though, and that’s their concern over the viability of Social Security and Medicare.

In a Kiplinger survey, 79 percent of pre-retirees were concerned about the financial strength of Social Security, while 69 percent of retirees were concerned.

Medicare didn’t fare much better, with 68 percent of pre-retirees doubting its financial strength and 62 percent of retirees doubting it.

Pre-Retirees and Retirees Financial Plan

Social Security is only one leg in the stool. Those who feel the most optimistic about retirement have 401(k) plans and savings. But sometimes that plan doesn’t come together, resulting in people working longer.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.

Anne Johnson
Anne Johnson was a commercial property & casualty insurance agent for nine years. She was also licensed in health and life insurance. Anne went on to own an advertising agency where she worked with businesses. She has been writing about personal finance for ten years.
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