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February Pension Report
- By Ray Sanderson
- Published 02/10/2010
- Pension Watch
The vast financial losses and uncertainty during the last year have forced all generations to reassess the funding, timing, and purpose of retirement. At this pivotal moment, Age Wave launched Retirement at the Tipping Point: The Year That Changed Everything™, a landmark national study conducted by leading research firm Harris Interactive.
This study examines the new retirement fears, hopes, attitudes, advice, and plans among four generations of Americans. In addition, we examine several major changes over the past year by comparing insights from this survey with results from Rethinking Retirement™, a survey Age Wave conduct-ed in collaboration with Charles Schwab Corporation and Harris Interactive exactly one year earlier. Today's pre-retirees say they will need to postpone their retirement
4.2 years on average, which would be the first time in history that retirement age significantly increased in America. The uninsured costs of healthcare are now considered the biggest potential financial wildcard in retirement.
Almost 60% of Americans say they have lost money in mutual funds,
401(k) plans, or the stock market in the last twelve months. Men and women in or near retirement suffered the greatest losses. On average, Americans think it will take seven years for their invest-ments to be what they were worth one year ago.
Today, the biggest financial worry among the age 55+ population is being unable to afford uninsured medical expenses during retirement. In fact, older Americans are 2.5 times as likely to say they are worried about paying for unin-sured medical expenses in retirement as they are about a lack of personal savings.
Loss of health is the unpredictable and often financially devastating wildcard in retirement. Long-term care, which is largely not covered by traditional health insurance or Medicare, can be particularly devastating. Almost seven in 10 people will need some long-term care, such as home care, assisted living, or nursing home care, after age 65. In 2008, the average annual cost for a private nursing home room was $76,460 a year.
In the last several decades, defined benefit (DB) pensions have largely been replaced by defined contribution (DC) plans, such as 401
(k) plans. Unlike DB pensions, which guar-antee a certain income regardless of econom-ic conditions, equity values in DC plans are tied to the ups and downs of stock prices.
Faced with today's uncertain economy and stock market volatility, only 18% of Americans now say they have actively planned enough and are confident about their retirement fu-ture.3 Even among the Silent Generation, most of whom are already retired, just 36% say they have actively planned and are confident they are adequately prepared.
Although men and women across all income levels have been damaged, lower income families are the most worried about their retirement. But even among families with in-comes over $75,000, just 27% say they have planned appropriately and are confident they will be able to afford the retirement they have dreamed about.
On average, pre-retirees say they now intend to postpone their retirement by 4.2 years, trig-gered by today's economic crisis. Al-though many are disappointed to be retiring later than they expected, the silver lining is that a shortened retirement can be far more affordable and secure. Retirement used to be a brief respite enjoyed by those few who lived long enough. During the 20th century, with the combined effects of entitlement programs and healthcare improve-ments, people began retiring earlier and living longer. As a result, the "work-to-retire-ment ratio," the ratio of years working to years spent in retirement, has steadily fallen. Today, people spend just 2.2 years working for every year of retirement.
Is it sustainable for the work span to continue to shrink as life expectancy increases? In the mid-1970s, for example, a "work-to-retirement ratio" of 3:1 (i.e. spending three years working for every year of retirement) was the norm. If we use the same formula of a "work-to-retire-ment ratio" of 3:1 today, our average retire-ment age would be 67 instead of
63.
After decades of out-of-control spending, Americans have been jolted into realizing that they must get back to basics and learn to live within their means in order to find financial peace of mind.
Four out of five Americans told us they have learned valuable lessons regarding financial responsibility during this recession that will help them in the future. When asked what financial lessons should be passed on to the next generation, they told us the most impor-tant advice and guidance is to "live within your means" and "begin saving at an early age". The percent of Americans citing "live within your means" as the most impor-tant lesson increased from 69% to 81% during the past year.
For further insight to this article vist the links listed below.
This study examines the new retirement fears, hopes, attitudes, advice, and plans among four generations of Americans. In addition, we examine several major changes over the past year by comparing insights from this survey with results from Rethinking Retirement™, a survey Age Wave conduct-ed in collaboration with Charles Schwab Corporation and Harris Interactive exactly one year earlier. Today's pre-retirees say they will need to postpone their retirement
4.2 years on average, which would be the first time in history that retirement age significantly increased in America. The uninsured costs of healthcare are now considered the biggest potential financial wildcard in retirement.
Almost 60% of Americans say they have lost money in mutual funds,
401(k) plans, or the stock market in the last twelve months. Men and women in or near retirement suffered the greatest losses. On average, Americans think it will take seven years for their invest-ments to be what they were worth one year ago.
Today, the biggest financial worry among the age 55+ population is being unable to afford uninsured medical expenses during retirement. In fact, older Americans are 2.5 times as likely to say they are worried about paying for unin-sured medical expenses in retirement as they are about a lack of personal savings.
Loss of health is the unpredictable and often financially devastating wildcard in retirement. Long-term care, which is largely not covered by traditional health insurance or Medicare, can be particularly devastating. Almost seven in 10 people will need some long-term care, such as home care, assisted living, or nursing home care, after age 65. In 2008, the average annual cost for a private nursing home room was $76,460 a year.
In the last several decades, defined benefit (DB) pensions have largely been replaced by defined contribution (DC) plans, such as 401
(k) plans. Unlike DB pensions, which guar-antee a certain income regardless of econom-ic conditions, equity values in DC plans are tied to the ups and downs of stock prices.
Faced with today's uncertain economy and stock market volatility, only 18% of Americans now say they have actively planned enough and are confident about their retirement fu-ture.3 Even among the Silent Generation, most of whom are already retired, just 36% say they have actively planned and are confident they are adequately prepared.
Although men and women across all income levels have been damaged, lower income families are the most worried about their retirement. But even among families with in-comes over $75,000, just 27% say they have planned appropriately and are confident they will be able to afford the retirement they have dreamed about.
On average, pre-retirees say they now intend to postpone their retirement by 4.2 years, trig-gered by today's economic crisis. Al-though many are disappointed to be retiring later than they expected, the silver lining is that a shortened retirement can be far more affordable and secure. Retirement used to be a brief respite enjoyed by those few who lived long enough. During the 20th century, with the combined effects of entitlement programs and healthcare improve-ments, people began retiring earlier and living longer. As a result, the "work-to-retire-ment ratio," the ratio of years working to years spent in retirement, has steadily fallen. Today, people spend just 2.2 years working for every year of retirement.
Is it sustainable for the work span to continue to shrink as life expectancy increases? In the mid-1970s, for example, a "work-to-retirement ratio" of 3:1 (i.e. spending three years working for every year of retirement) was the norm. If we use the same formula of a "work-to-retire-ment ratio" of 3:1 today, our average retire-ment age would be 67 instead of
63.
After decades of out-of-control spending, Americans have been jolted into realizing that they must get back to basics and learn to live within their means in order to find financial peace of mind.
Four out of five Americans told us they have learned valuable lessons regarding financial responsibility during this recession that will help them in the future. When asked what financial lessons should be passed on to the next generation, they told us the most impor-tant advice and guidance is to "live within your means" and "begin saving at an early age". The percent of Americans citing "live within your means" as the most impor-tant lesson increased from 69% to 81% during the past year.
For further insight to this article vist the links listed below.
