Let's Get Realistic About Retirement

Why It Matters:

  • The gaps between retirement expectation and reality can’t be ignored
  • The responsibilities of retirement funding are shifting more to the individual
  • Adjusting your retirement dreams may be less painful than you think

Ryan Besch tkc.profilePicture Written by: Ryan Besch | Transamerica
Dec. 04, 2018

3 Min readClock Icon

Retirement isn’t what is used to be. People are living longer, Social Security is dwindling, and many employers can no longer afford to sponsor traditional retirement plans.1

Do these elements pose a risk to your ideal future? Maybe. They’ll certainly have an impact, but how we plan for tomorrow is ultimately up to us.

Let’s start by defining the landscape. Retirement funding generally breaks down to three parts, the first of which is the 401(k). The granddaddy of retirement plans, the 401(k) blueprint was designed decades ago to help fund the retirements of long-service workers with a shorter life expectancy. Generations have depended on it, but things are changing. People are living longer, and not all employers can afford to offer such a long-term investment to their entire workforce.1

The second component is Social Security. You’ve likely heard rumblings about when this source of retirement income will run dry, and it could be sooner than we hoped. In its 2018 Annual Report, the Social Security Board of Trustees estimates that all cash reserves will be depleted by 2034. 2 Don’t wave the white flag just yet, though.

The third and final piece of the puzzle comes down to you: personal savings. Considering the questionable future of parts one and two, personal savings cannot be overlooked. Alternate savings vehicles like an individual retirement account (IRA) could help pad your strategy, along with life insurance designed to build cash value and long-term investments on the conservative side.

Hopes Still High

While retirement confidence may waver person to person, today’s workers still have aspirations. According to the 2018 Aegon Retirement Readiness Survey, common retirement dreams such as travel, exploring hobbies (old and new), prioritizing quality family time, and volunteering still reign supreme.1

Make a Plan

The No. 1 retirement concern for American workers is outliving their money. 3 We also know that worldwide, people with a written retirement plan are more confident they’ll retire with a comfortable lifestyle than those who don’t.

First, take a moment to get a realistic picture of your projected lifespan. The Actuaries Longevity Illustrator is just the tool for the job. It crunches variables like birth date, gender, smoker status, and health on the Actuaries’ MP-2015 scale to generate a reasonable lifespan estimate. Once you have your number, you’ll have a better idea of how long your money needs to last.

Consider making a list: How much monthly income would you need in retirement to cover expenses, life goals, travel, leisure, and healthcare costs? It might help to schedule a meeting with your financial professional to work this out and ensure you have everything covered.

Poor Health Doesn’t Pay

One of the biggest challenges facing retirement readiness could be your health. The next generation of cholesterol drugs is projected to cost $14,000 a year, per person.4 One year in a semi-private room in a nursing home will set you back $85,776 on average.5

That’s why building long-term preventative health habits is so crucial. It could make a night-and-day difference in the quality of your future.

Wealth + Health

While we can’t predict the future, we can certainly prepare for it. The habits we embrace today, physical and financial, could have a big impact on our lives in retirement. Consider adding these strategies to your long-term plan:

  • Differentiate your investments and holdings
  • Small steps add up: Take the stairs vs. the elevator, park your car at the far end of the lot
  • Bring a hand-packed lunch to work whenever possible
  • Work as far into your later years as you comfortably can
  • Consider additional retirement savings vehicles like IRAs
  • Seek out insurance products to help cover medical and care expenses
  • Consider financial products that offer guaranteed lifetime income
  • Delay drawing on Social Security until absolutely needed
  • Consider downsizing or taking a reverse mortgage
  • Do your best to eliminate debt (sooner rather than later)
  • Save more and spend less

Things to Consider:
  • Explore additional savings avenues outside the traditional 401(k) to pad your strategy
  • Long-term health is just as important as your long-term savings
  • Schedule time to sit down with your financial professional and iron out a strategy

1 2018 Aegon Retirement Readiness Survey

2 Social Security Administration, 2018

3 “17th Annual Transamerica Retirement Survey,” TCRS, 2016

4 JAMA, 2016

5 “Long Term Care Costs and Costs of Care in 2017”, Genworth Financial, 2017

Neither Transamerica nor its agents or representatives may provide medical, tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.

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