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Strategies for a successful retirement

Everyone’s planning to work more

A growing number of people are planning to work longer and retirement is no more a top priority for some.

But why? Due to savings shortfall.

The cost-of-living crisis is causing pre-retirees to delay their retirement. Those planning to delay their retirement say they will need to push it back by almost three years on average, with nearly two thirds (64%) unable to afford the loss of income whilst costs are so high.

But there is more to it.

Some people love working and they do not like the idea of ‘not doing anything’ when they retire.

About 26% of people want to continue working simply because they enjoy their jobs. A further one in four (25%) say they don’t feel old enough to retire yet, while a fifth (20%) worry they will be bored if they retire.

The situation: About 55% of workers plan to work after they retire. That includes almost 20% who plan to work full time and more than a third who plan to toil part time.

Unfortunately, workers just aren’t prepared to retire and about 15% of all workers expect their primary source of retirement income to come from working. This means that 15% of people will not be able to live a good life in retirement if they fail to get a decent job.

Things are changing rapidly. Five years ago, 66% of baby boomer workers, for example, expected to retire after age 65, compared with 71% in late 2022, while 54% planned to work in retirement (compared with 55% in 2022).

The savings situation: Total household retirement savings have increased in the last few years. The figure stood at $164,000 in 2017 and jumped over $100k in 2022 to stand at $289,000. But, unfortunately, this money isn't enough to retire.

Most workers (53%) say they simply don’t have enough income to save for retirement. Salaries might have increased but inflation is also there, which means people just don’t have enough money to save.

The change: People appear to be doing. the right thing, i.e.: finding more opportunities to earn money.

About 16% of pre-retires are presently looking for additional work in order to boost their income, and 10% are concerned about the stability of their job in light of the current economic conditions.

Retirement confidence in the US has declined by the largest margin since the Great Recession. This, however, keeps on changing every month with the changing situation. For now, just 64% of workers are very or somewhat confident they’ll have enough money to live comfortably in retirement, down sharply from 73% in 2022.

Why does it matter? People who push retirement or work longer continue to get a regular paycheck, so they don’t have to live off their savings. This is important because once you start to dig into your savings, it is hard to stop. It’s easy but it’s very risky.

Working more means more disposable income, thus a chance to save more. Plus, it allows people to delay claiming Social Security benefits, guaranteeing a higher monthly payout for the rest of their lives.

Social Security’s full retirement age has been pushed back, to as late as age 67 for anyone born in 1960 or after. The government realizes that Americans are living longer, which also means that they need to save more to retire happily.

There is also another important factor to consider: the shift from pensions to 401(k)-type plans. Pensions generally offer an incentive to start collecting benefits at a certain age, whereas no such trigger exists in 401(k) plans.

You will have to plan though: Most people will lose their jobs as they grow older. About 56%, of full-time workers in their early 50s lose their jobs before they’re ready to retire.

This means having to look for another job, which can be hard as you grow older. Just 10% of people who suffered an involuntary job separation in their early 50s earn as much per week after their separation as before it. Thus, you will suddenly have less money in your hand.

In the aftermath of the Great Recession (from 2008 through 2012), workers 50 to 61 years old who lost a job were 20% less likely to be reemployed than workers in their 20s and early 30s. Those age 62 and older were 50% less likely to have a new job. The situation isn’t very different today.

But, there’s a ray of hope. The labor market is strong, but it’s unclear how long that strength will last. Also, older people may not always be suitable for certain jobs, especially jobs that are in demand.

What to do then? Your current job will probably not be there tomorrow. There are several reasons why. Your skills may get outdated but more importantly, it’s often more expensive to keep new workers than to hire new ones.

The estimated one-year cost to a firm when an employee delays retirement is $50,000.

Less than 33% of companies have a “transition” program such as flex work schedules, reduced hours or shifting to a different role.

Here’s what you can do to ensure you stay employed in your 50s and beyond:

• Make new connections. Instead of continuing to try to win your current employer, consider shifting jobs and finding a new employer.

• Get enrolled in college. About 55% of 50-somethings who attend college and voluntarily switch jobs continue to work to age 65, compared to 45% of workers who don’t make a voluntary move.

• Be a little versatile. Find other ways to earn money such as remote work and consider passive income sources.

  Delaying retirement can be highly advantageous, provided you use this time wisely. So, buckle up.

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