Editor’s Note: This story originally appeared on NewRetirement.
Most of us have done some retirement planning activities. In fact, according to a recent study from Vanguard, 90% of pre-retirees and recent retirees say they have “planned.” Mmmm… “planned?” Does that mean you have thought about it? Or, does it mean you have a written plan addressing all the various financial and emotional aspects of your future?
There is a lot of variation in planning. And, some people are doing a lot more than others. In fact, only a few are creating a really comprehensive and reliable plan. Have you done more or less than the average? Is it enough?
Keep reading to find out exactly which questions people are tackling as they transition to retirement. Discover what more you might want to do.
60% of pre-retirees have figured out ‘When should I retire?’
Figuring out the big date is the most planned activity. It makes sense, people look forward to that big day, and you can’t retire without setting a date unless an injury or other event prevents you from working any longer.
However, if you haven’t answered some of the other financial questions, setting a retirement date is like inviting everyone to a party without a venue, food and beverage, music or entertainment.
NOTE — average retirement age: The Boston College Center for Retirement Research puts the average retirement age at 62.8 for high school graduates and 65.7 for college graduates.
58% of pre-retirees have tackled this question: ‘When should I start Social Security?’
This is a great question to have answered.
Many people have a hard time resisting the lure of getting Social Security checks as soon as possible — which is age 62. However, waiting until later generally will mean a higher amount of money over your lifetime — unless you think you won’t live very long.
So, calculating when you “should” start benefits is a useful planning activity. Most experts recommend that you delay the start of benefits in order to maximize your monthly payments.
NOTE — most popular age to start Social Security: Claiming early at age 62 is the second most popular claiming age. Your full retirement age (FRA) as set by the Social Security Administration has gained in popularity over the last 10 years and is now the most common age people start benefits.
57% of pre-retirees have calculated ‘amount of monthly retirement income needed’
If you want to have a secure retirement, knowing how much income you need and when is one of the best retirement planning activities to have addressed.
Of course, getting this right can be complicated.
Some experts say that you should plan on spending 85% of your pre-retirement budget. Others suggest that your expenses will increase when you first retire, then slowly decrease until you start spending a lot of money on health care near the end of your life.
However, each of us is unique. It might be more realistic and reliable for you to actually think through your own plans in three- or five-year increments and budget each year appropriately with wiggle room for unforeseen circumstances.
NOTE — average retirement income: The average retirement income is $85,153, but there is a lot of variation. depending on age and location.
55% of pre-retirees have answered ‘How much do I need to retire?’
It may seem crazy that a full 45% of people are retiring without knowing whether they have enough money or not. However, while most people think that having a treasure trove of savings is the key to a secure retirement, some retirees are quite successful by just making it work with what they have.
NOTE — average retirement savings: According to Federal Reserve SCF data, the average retirement savings for people in their 60s is:
- $221,450 for people ages 60-64
- $206,800 for people ages 65-69
See average retirement savings for all ages.
47% have planned whether or not to work in retirement
Retirement jobs are increasingly popular. And, there are so many benefits to working in retirement — income, social connections, intellectual stimulation, sense of belonging and purpose, and more.
In fact, an AARP study reported that almost half of their respondents planned to have retirement jobs and be a working senior into their 70s or beyond. Have you thought about working in retirement? The kind of job? Hours? Pay?
NOTE — How many over 65 are still working? Whether it was planned or not, according to the U.S. Bureau of Labor Statistics, about 19% of Americans aged 65 and older are now in the workforce, up from about 12% in 1996. And, by 2026 nearly 22% of people 65 and older will be working, with those 75 and older experiencing the fastest growth rate.
46% have concerned themselves with government health care programs — Medicare and more …
Almost everyone signs up for Medicare at age 65. However, this benefit will not cover all of your needs. Out-of-pocket expenses for health care are sizable, and figuring out the best way to minimize the expense is confusing.
Are you retiring early? Learn about nine ways to cover health care if you’re retiring before 65.
NOTE — average health care costs: According to Fidelity’s Retiree Health Care Cost Estimate, a 65-year-old couple retiring in 2021 will need an estimated $300,000 to cover health care costs in retirement. This is a significant increase and the highest estimate since calculations began in 2002.
43% have thought about drawdowns and/or generating retirement income
Turning your assets into income is one of the most critical retirement planning activities. You have spent your life saving, now you need to figure out how to withdraw it so that you have enough for as long as you live — no matter how long that turns out to be — while being tax efficient.
Studies show that retirees who report having a guaranteed income that exceeds their spending report less stress and an overall happier retirement.
42% have addressed how to manage investments after retirement
Ideally, you have been focused on saving money every month and investing in a way that has grown those investments as much as possible. After retirement, most experts suggest that you shift your mindset to be about preserving and using that money.
Less than 35% have create plans for long-term care, taxes, estate or home equity
Each of these subjects is critically important for a complete retirement plan, but very few people are addressing them.
About 70% of people who turn age 65 will need some type of long-term care in their lifetime, according to the U.S. Department of Health and Human Services, but few are prepared to pay for that care and it can be prohibitively expensive and is not covered by Medicare.
The importance of worrying about taxes in retirement may depend on your wealth, where you live, how you get income and other factors.
Everyone should think about their estate plans — whether you have wealth or not — there are documents that can make the end of your life better for you and your heirs. Know about the four estate planning documents everyone needs.
Many people have more wealth in their home than savings. It is therefore important to consider your house as part of your overall retirement plan. Should you downsize now and use the money to help create retirement income? Or, would it be better to wait and sell the home if you ever need long-term care? The ways to tap into your home equity are endless and can mean the difference between a stressful and stress-free retirement.
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