The New Rules of Retirement

Why It Matters:

  • We can no longer approach retirement like our grandparents did.
  • Retirement funding responsibilities are shifting more to the individual.
  • Many Americans are woefully optimistic about their financial future.

Ryan Besch tkc.profilePicture Written by: Ryan Besch | Transamerica
Oct. 10, 2018

6 Min readClock Icon

The only constant in life is change.

This gem of wisdom is widely attributed to the Greek philosopher Heraclitus, and its meaning is just as relevant today as it was in his time.

It’s easy to get comfortable with the way things are, which may leave us vulnerable when change inevitably comes. Retirement is no different.

The seventh annual Aegon Retirement Readiness Survey asked 16,000 workers and retirees across 15 countries which trends are impacting their plans for retirement. While 49% of workers believe future generations of retirees will be worse off than current workers, they still plan to depend on the traditional sources of retirement income.

The problem is, those traditional sources may not be as dependable as we hope. Retirement funding is generally composed of three parts: Social Security, workplace retirement benefits, and personal savings. Two of the three — Social Security and employer-sponsored retirement plans — have become incredibly strained.

Despite this well-known fact, U.S. workers surveyed still expect 71% of their retirement income to come from the government and their employer. Yikes.

Long expectations come up short

So what’s causing all the strain? Social Security has been dwindling for some time, and with 10,000 Americans turning 65 every day, this once-hopeful source of retirement income will shrink even further.

The healthcare costs from living longer may also impact your retirement savings. The projected total lifetime healthcare costs for a healthy 65-year-old couple is over $404,000. The average cost of a semi-private nursing home is $85,000 a year. While these figures may be alarming, they aren’t a reason to start waving the white flag just yet.

The responsibility of retirement funding is clearly shifting more to the individual, meaning you have more control over your destiny in the end.

401(k) Today

From a cost perspective, typical 401(k) plans may not be sustainable for many of today’s employers.

Keep in mind, the 401(k) blueprint was designed decades ago to fund retirements of long-service workers with a shorter life expectancy. Longer lifespans and evolving workstyles are changing that.

Many of today’s workers are breaking from the traditional one-job-for-life model. With a more mobile population and the emergence of the gig economy, we’re seeing people change employers several times over their careers, even becoming self-employed here and there.

The lesson: Do what works for you.

What it all means

Today’s workers need to consider not just how they’ll fund their retirement with minimal Social Security and employer-sponsored retirement benefits, but how they’ll fund their retirement for longer.

For a married couple reaching age 65, there’s a 50% chance one of the spouses will live to be at least 92, according to the Society of Actuaries.

Aside from building more retirement savings into your current budget, you can take additional steps to better your chances at achieving a fully-funded retirement.

We’ve prepared a flyer just for this purpose. Give it a look and schedule a meeting with your financial professional to ensure you’re on track for a fulfilling future.

Things to Consider:

  • Download our flyer to see the whole picture.
  • Schedule a meeting with your financial professional to discuss your future planning.
  • Consider savings and investment vehicles outside the typical 401(k).

Read the next article in our Retirement Readiness series, Let's Get Realistic About Retirement.

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