Marking Time — When Retirement Milestones Become Personal

  There’s something about a birthday that ends in zero that hits differently. And I have one of those this week.

I’ve spent more than half my professional life thinking, writing, and talking about retirement — how people get there, how they prepare (or don’t), and what it all means when work finally loosens its grip.

And yet, when you hit a milestone like this, “theory” gets very personal very fast.

Truthfully, this isn’t what I thought “this” would feel like. Not dread. Not triumph. Just … different. Though lately, I’ve been thinking about it more than I expected.

See, it’s not just another candle (you’d have to forewarn the local fire department). It’s a checkpoint. A round number that invites reflection whether you ask for it or not. Sure, it’s just another year. But it’s a whole other category of living.

That said — and I’m happy to be able to say this — I don’t “feel” my age.[i] Or what I thought it would be like to be this age.

What I am starting to feel — though only recently, and doubtless due to the approaching anniversary of my birth — is an appreciation of how I spend my time. 

No longer bound by office start and stop times, the “rigor” of commutes, the (seemingly) endless pattern of meetings and conference calls — time, and the opportunity to see and do “other” things beckons. 

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You start to notice how you spend time, and who you spend it with. You’re more aware of what drains you — and what gives energy back. You get better (though it’s still a work in progress) at saying “no,” not because you’re tired, but because you’ve learned that every “yes” displaces something else.

There are a fair number of age markers in our business; age 50 for catch-ups, 59 ½ for penalty-free withdrawals,[ii] 62 for early Social Security withdrawals, 65 (as adjusted) for retirement/Social Security, and age 73 or 75 for RMDs (depending on your age). We’ve even recently added some others (ages 60-63) for “super” catchups. And let’s not forget the implicit retirement age “marker” associated with target-date fund selection. 

These markers give us an opportunity — an “excuse,” if you will, to engage with individuals along the way to help them consider different, and perhaps better, ways of financial preparation. Their advantage is you don’t need anything more than a calendar to anticipate and track them. Their limitation is that many arrive too late for truly meaningful course corrections — when time, compounding, and flexibility are already constrained.

If there’s a lesson in those age-based milestones, it’s this: milestones matter, but they don’t have to define you. They’re prompts, not verdicts. Invitations to take stock, adjust course, and — if you’re lucky — keep doing meaningful work with people you respect — and for people that need your support.

Because if you’ve learned nothing else by the time you reach a birthday that ends in zero, remember that the future is never guaranteed — and the time to make change — is finite.

• Nevin E. Adams, JD

 

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[i] Some of you, surely, are thinking to yourself “and you sure don’t act it, either!”

[ii] I’m cognizant of the rule of 55, though I suspect many aren’t.

Retirement Realities

 Are you confident about your retirement finances? Apparently, and despite responses that undermine a rational level of confidence, many are.

Last week, the Employee Benefit Research Institute (EBRI) and Greenwald Research unveiled their 34th annual Retirement Confidence Survey (RCS). Now, I’ve commented previously about the dubious conclusions one can draw from personal sentiment surveys, not to mention those personal assessments of wealth and needs.

Those limitations notwithstanding, over the years, the Retirement Confidence Survey has helped uncover a number of interesting and intriguing perspectives about retirement, real and imagined―and no small number of what would appear to be unrealistic expectations about retirement: expectations around how long individuals think they will be able to work, for example, or that they will be able to work for pay after retirement.

Additionally, there have been indications that more individuals expect to receive a pension than would be suggested by the data regarding how many American workers are actually covered by such programs. However disconnected those perspectives seem from reality, their mere acknowledgement provides a valuable opening for discussion.

The RCS is, after all, based on phone interviews with participants and retirees, rather than an objective evaluation of their incomes and actual savings accounts. However, in view of the expressed “need” versus “have” amounts, it’s hard not to wonder how many are confident when they have no reason to be. Indeed, two-thirds (68%) of the workers and three-fourths (74%) of retirees surveyed were very or somewhat confident about having enough money to live comfortably in retirement—unchanged from a year ago (albeit a different group of individuals). And one might feel a bit better about that level of expressed confidence until you get to the datapoint regarding how many had made any attempt to figure out how much they would need, only to discover that (only) half (52%) had.[i]

But if worker pre-retirement confidence (still) seems disconnected from reality, the post-retirement version—from folks actually living IN retirement—remains reassuring. While over 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.

Moreover, despite those higher-than-expected costs, significantly more retirees this year—3 in 10—say their overall lifestyle in retirement is better than expected[ii]—and more than two-thirds of retirees agree they are having the retirement lifestyle they envisioned—a statement with which a quarter of retirees strongly agree. And while three-quarters of workers expect to work in retirement, just 3 in 10 retirees report they actually do.

As a long-time RCS “watcher” (and, once upon a time, an RCS “voice”), you learn that people’s confidence rises (and falls) with the stock market—though there doesn’t seem to be a direct correlation between those movements and their actual retirement savings. People consistently report that they haven’t made even a single attempt to figure out what their retirement needs will be—and among those who have been “guessing” remains a popular response.[iii] The closer you are to claiming Social Security benefits, the more confident you are in receiving them—even though this year’s RCS notes that fewer than half of workers have reviewed the amount of their Social Security benefits at their planned retirement age, and only 59% have thought about how the age at which they claim Social Security will impact the amount they receive (and, despite their claiming status, just 77% of retirees have).

On the other hand, the mere attempt to figure out retirement needs seems to increase confidence.  Ditto working with an advisor. But the biggest boost in confidence seems to come from having a retirement plan; those reporting they or their spouse have money in a DC plan or IRA or have benefits in a DB plan from a current or previous employer were more than twice as likely as those without any of these plans to be at least somewhat confident (77% with a plan vs. 34% without a plan).

All, in all, for those looking to feel more confident about retirement (or looking to help others feel more confident), I’d offer the following suggestions:

• Get access to a retirement plan at work—and participate.
• Take advantage of any number of free retirement-needs calculators to get at least a sense of your likely needs (it probably won’t be as bad as you think).
• If your plan offers access to a retirement plan advisor—use them.

If you do all of those, you’ll not only feel more confident about retirement—odds are that feeling will be supported by reality.

- Nevin E. Adams, JD

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[i] Even more disquieting is the approach taken to do so. Previous versions of the RCS have found “guessing” to be a leading response. This year’s RCS details a number of “thought about” categories which wouldn’t seem to be very substantive preparation.

[ii] Of course, steady followers of things like the RCS may have a developed a disquieting view on what retirement would actually be like.

[iii] In a nice “two-fer,” those reporting that they or their spouse participate in a retirement plan were significantly more likely than those who do not participate in such a plan to have tried a calculation (59% vs. 19%).