32% of retirees wish they had started saving for retirement at an earlier age.
Is This What You Had in Mind for Retirement? Here's What Actual Retirees Found Out.
Retirement can seem like an abstract idea until we're alarmingly close to it. It's a little like dying - inevitable, but who wants to think about it. For that reason, many of us put off important moves that could make old age easier for us and our heirs, such as estate planning and writing living wills. When pre-retirees do contemplate retirement today, a new survey by HSBC Group suggests we're either working off a new model of funding it or we're out of touch with where our money actually goes in retirement.
The way retirees today fund their spending differs from what pre-retirees expect for their future, according to results from more than 1,000 Americans surveyed. Their responses were part of a larger effort in which more than 18,000 working and retired people in 17 countries were polled on retirement issues.
Other survey highlights:
Pre-retirees in the U.S. are more likely than current U.S. retirees to expect future retirement income from selling property, either by downsizing or selling a primary or secondary home.
A higher percentage of pre-retirees with children expect to feel happy in retirement than do childless workers.
Cash is what 52 percent of retirees are using to fund their retirement, followed by stocks (38 percent), mutual funds (32 percent), and a spouse or partner's income (29 percent).
22%of working age people have not started saving for their retirement
of pre-retiree who have started saving for retirement,
44%
have stopped or faced difficulties.
Many retirees wish they had started saving earlier for retirement
Source: The Future of Retirement: Generations and journeys, Canada Report HSBC
DO YOU REALLY WANT TO RETIRE? We keep hearing today that age 60 is the new 50, or that age 80 is the new 70. Maybe there is some truth in this thinking. The youngest president elected to office was John F Kennedy, who assumed office at the age of 43 years, 236 days. The oldest president to assume office was Ronald Reagan, who was 69 years, 349 days old when he assumed office, and was also the oldest in office 77 years, 349 days, when he left office. The next president of the United States will either be age 69 (Hillary Clinton) or 70 (Donald Trump) upon assuming office next year. If re-elected, either 77 or 78 upon leaving the presidency. Had Bernie Sanders gone on to win the presidency, he would have been 75 upon assuming office and ended his second term at 83. The new hands-on CEO of Fox News is Rupert Murdoch, age 85, who replaces Roger Ailes, age 76, who resigned amid accusations of being inappropriately randy around female colleagues. Fox’s #1 star and money maker, Bill O’Reilly, age 66, in his spare time averages more than one New York Times bestseller a year and moonlights as executive producer on award-winning films for National Geographic and Fox.Who needs to retire?
To retire — or not — is primarily a lifestyle choice, but one that also has implications for one’s health. Findings this week presented in Toronto by the Alzheimer’s Association indicate that jobs requiring mental engagement, particularly jobs such as teaching, social work, sales and law, that involve interacting with others, can dramatically lower the chance of acquiring Alzheimer’s or other forms of dementia. These results support those from France’s Bordeaux School of Public Health, which found that each additional year of work lowers the risk of dementia by 3.2 per cent. All told, according to Bordeaux’s director, “those who retired at 65 years old had a 14.6 per cent lower risk of getting dementia than those who retired at 60 yeas old."
Numerous other studies indicate that work keeps us sound in body as well as in mind. A 2005 British Medical Journal analysis of Shell Oil employees found that 55-year-old retirees were 89 per cent likelier to die within 10 years of retirement than those who retired at 65. Early retirement especially harmed those below Shell’s managerial and professional rungs — skilled, semi-skilled, unskilled and clerical workers were 17 per cent likelier to die young.
Why the next decade may foil most retirement plans
This morning I received a “financial plan” from an individual wanting me to review it with respect to his personal retirement goals. The plan was generated by one of the many “off the shelf” software packages that takes all the inputs of income, assets, pensions, social security, etc., and then spits out assumptions of future asset values and drawdowns in retirement.The problem is that the return assumptions were grossly flawed. In all of these plans, it is assumed individuals will have a rate of return of somewhere between 7-9% annually heading into retirement, and then 5-7% during retirement. The first major flaw in the plan is the “compounding” of annual returns over time which never happens. The second, and most important, is the future expectation of returns for individuals over the next 10-20 years.These projected numbers are often talked about without reference to the current or future inflation rates or the impact of "emotional decision making", both of which can wreak havoc on your future rates of return.
With retirement plans having a finite time span for both accumulation and distribution of assets, the time lost in
“getting back to even”
following a major market correction is the primary consideration.
The chart below picks up on the investor psychology chart first shown above. The chart below illustrates the difference between expectations and reality. The illustration shows the difference between the inflation-adjusted return on a $100,000 investment in the S&P 500 growing at 8% annually as opposed to the impact of gains and losses in market returns over time.
source: realinvestmentadvice.comcurrency: USDS&P 500 Market depicted net of inflation.