So Is There a Retirement Crisis or Not?

You’ve probably seen the headlines… Is there a retirement crisis you should worry about? Surveys show many Americans feel unprepared. Surging inflation, loose monetary policy and Social Security woes abound… So how concerned should you be, and what should you do?

Business Insider

Is there a retirement crisis for you to be concerned about? Leaving mainstream media clickbait headlines aside for a minute, the answer is, “It depends.”

Some surveys point out that your retirement savings might not last very long. The potential for surging inflation and Fed monetary policy could eat away your retirement.

Many people don’t have an optimistic outlook on their retirement, even though a handful do.

Now, with a new Administration taking office for the next four years, retirement security worries are escalating.

Writing on MarketWatch, Mark Hulbert points out a possible reason why the “retirement crisis” isn’t quite as easy to pin down as many people might think:

This paradoxical situation exists because of how we try to assess the state of retirement finance. We all too often focus on the average retiree, even though this hypothetical “average” individual doesn’t exist. Financial preparation for retirement varies so widely that this average creates more confusion than insight.

This makes sense because averages can be skewed higher by big numbers. For example, a handful of wealthy investors who participate in a retirement survey can distort our understanding of the “average” retirement saver.

And depending how the data is interpreted, you’ll discover both optimistic and pessimistic outlooks from retirement savers.

Retirement crisis? Depends on who you ask…

One 2020 study by Northwest Mutual highlighted that only 20% of respondents plan on delaying their retirement. You might think that’s a fairly optimistic number of people who plan on retiring on-time or early.

Another study at the Transamerica Center also shared some optimistic highlights:

  • 75% of respondents had confidence in their ability to maintain a comfortable lifestyle throughout retirement in light of the pandemic.
  • Approximately 9 in 10 are happy, have good relationships, and are confident in their ability to manage their finances.
  • 95% of respondents think Social Security will provide at least part of their retirement income. (That optimism could change by 2034.)

Another study of 1,500 retirement savers issued this year paints a much bleaker picture. In fact, it indicates a retirement crisis on a national scale. Some of the more dire highlights from this study include:

Only 35% of retirees think they prepared adequately for retirement, and 1 in 4 are worried they’ll outlive their retirement savings.

59% of retirees retired earlier than planned, and 65% of those who retired early did so because of health issues.

16% of retirees have to work part-time because their retirement funds and social security aren’t enough to cover expenses.

If you’re unclear about whether there is a retirement crisis to worry about, you’re certainly not alone. But there are some things that are becoming more clear...

Social Security is projected to be behind the 8-ball in just over a decade, and any meaningful plans to fix it look questionable at best. Relying solely on Social Security, especially Social Security in its current form, doesn’t seem like a good idea.

The Fed tends to make things worse, and lawmakers didn’t help retirement savers much in 2020 with the CARES Act.

We can't predict the future. We don't know when, or even if, national programs like Social Security or the Fed's loose monetary policy will get fixed. We don't know whether a health issue might force an unplanned early retirement. Instead of letting those anxieties keep you up at night, the best thing to do is take control of your own situation.

The Only Retirement Worth Focusing On

Hulbert ended his piece with a good bit of wisdom:

The retirement financial situation on which you should be focusing most is your own—regardless of whether there is or is not a crisis nationally.

As long as you make sure your own retirement isn’t in crisis, then media headlines about possible future disasters shouldn’t bother you as much.

Nevertheless, it’s always good to take a few minutes and examine your retirement savings. With some foresight and planning, your retirement plan can become a source of security and comfort rather than of concern or alarm. Consider your risk tolerance, your current holdings, and whether you're sufficiently diversified. Many have discovered diversifying their retirement savings into precious metals like gold and silver have given them a great deal of peace-of-mind.

Because no matter what the headlines say, tangible physical assets can act as a hedge against inflation and diversification helps protect your savings no matter which direction the economy heads. Take the steps you need to keep your retirement on track with a "sleep well at night" savings strategy.

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