Today we’re going to continue our discussion of an Edward D. Jones, Age Wave, and The Harris Poll new study covering habits and opinions of older Americans, their lifestyles, what they think about retirement, and so on.
In case you missed the first post in this series and want to catch up, go back and read Longevity and the New Journey of Retirement.
As usual, I’ll be sharing some highlights of the study and then giving my thoughts on their findings.
Let’s get started…
Healthy Life Expectancy and Life Expectancy
Have you ever thought of the difference between a person’s life expectancy and their “healthy” life expectancy?
Well this study does…and here’s what they found:
The difference between healthy life expectancy and total life expectancy in the U.S. is 12.4 years, and that’s a large gap by global standards. The average American spends the last 12+ years of life with their activities at least partially—and often seriously—curtailed by illness, injury, or cognitive impairment. Among those 65+, 88% are managing at least one chronic condition and nearly two-thirds have two or more chronic conditions. Over the age of 85, one in three Americans has Alzheimer’s or related dementias.
As the ranks of older adults grow, more people need more medical care and personal assistance late in life. That can lower well-being of the individual, it can be a burden on family members assisting them, and it can be a major drain on finances, especially for long-term care.
This places even more pressure on individual savings and most Americans are falling short. Although the national savings rate has risen over the last decade, it’s still well shy of the recommended rate of at least 15%. In addition, most people do not maximize their retirement account contributions, too many make penalized early withdrawals, and 22% of Americans eligible for retirement plans don’t contribute at all. Fundamentally, people don’t save enough for their lengthier lifespans, and most wait too long to start saving for retirement. Retirees started saving at an average age of 38, but in retrospect, they say they should have started saving nearly a decade earlier, at 29.
Wow. Lots to unpack here:
- I have never considered the difference between a healthy lifespan and total lifespan, but now that they mention it, it makes sense.
- The fact that the difference between the two is 12 years is HUGE — that’s a MASSIVE amount of time where people are living a less-than-healthy lifestyle.
- This is another argument for early financial independence and retirement. Just piecing together the numbers, as we saw in the last post on this series, on average retirement lasts 18.8 years for women and 11.5 years for men. If 12.4 years is the length of a less-than-healthy lifespan, that means under average retirement ages women get six healthy years in retirement while men get NONE! Yikes! This is yet another reason to retire early — you get more healthy years of freedom to do what you want.
- You’ve probably heard people say to “get out and do things while you can because there will be a day when you can’t do them.” These are the numbers they are referring to when they say things like this.
- Long-term care is a topic we’ve discussed here at some length. Check out Thoughts from a Long-Term Care Insurance Expert and the links in that post for much more on the subject.
- I’m not surprised that Americans are falling short on saving for retirement as we’ve seen that over and over. But what does make me sad is this: “Most people do not maximize their retirement account contributions, too many make penalized early withdrawals, and 22% of Americans eligible for retirement plans don’t contribute at all.” Ugh. Many company retirement plans offer employees FREE MONEY for saving and to think that so many of them are not taking full (or any) advantage of these opportunities is heartbreaking.
Old Versus New Definitions of Retirement
Next the study asks respondents the following:
What best describes your parents’ generation’s retirement vs. retirement today?
Here are the responses — first for the parents:
- 42% — A time for rest and relaxation
- 22% — A new chapter in life
- 19% — A continuation of what life was
- 16% — The beginning of the end
And here are current-day retirees’ responses:
- 55% — A new chapter in life
- 27% — A time for rest and relaxation
- 11% — A continuation of what life was
- 7% — The beginning of the end
Some thoughts from me:
- You can see in these responses what we learned in the last post — the definition of retirement is changing right before our eyes!
- Back in the day, retirement was all about golf, bowling, TV, and brunch with friends — rest and relaxation galore! And for 16% of people, it was the beginning of the end! (I would argue it was higher than that, but people are eternally optimistic in some surveys.)
- Now over half see retirement as simply a new chapter in life — just like graduating from college, getting married, having children, etc. I like it! And the “beginning of the end” numbers are way down!
Now even more interesting than this (at least to me) is the question, “What milestone marks the start of retirement?”
Want to guess what the top results are?
They are:
- 34% — Stopping full-time work
- 22% — Receiving Social Security and/or a pension
- 17% — Leaving my job/career
- 17% — Achieving financial independence
- 10% — Reaching a certain age
My thoughts:
- For me, it was certainly “stopping full-time work.”
- This still allows for part-time work, which is what I do now (maybe two hours per day on average, but it’s totally flexible).
- I have yet to take Social Security and likely won’t for over a decade from now.
- As for “leaving my job/career,” if I had just ended my career but taken a full-time job in something completely different, I would not have considered myself retired.
- I think we all know there’s a difference between financial independence and retirement, so it’s interesting so many put them together. I guess that’s what FIRE did initially and now that so many people are FI but not RE I think these are becoming two more distinct activities.
- “Reaching a certain age.” They don’t give the age so what would it be? 65? The age you take (or could take) Social Security? Something else?
Working in Retirement
Next they get back into working in retirement by asking people what they see as the ideal approach to balancing work and leisure in retirement.
BTW, the fact that they are even asking this question shows how much the definition of retirement is changing. Back in the day no one would have even considered “working” in “retirement” since retirement, by definition, meant not working. That’s no longer the case.
In fact, more people work in retirement (or plan to) than don’t these days. Here are the topline results for how people think about working in retirement:
- 41% — Never working for pay again
- 59% — Working is some part
Almost 60% plan to work in some capacity in retirement!
My how the times (and definitions) have changed!
In addition, you know this is going up. I bet it’s over 60% in a year or two.
Of those 59% that see working as part of retirement, here’s how they differ in their perceptions of what that means:
- 22% — Working part time
- 19% — Cycling between work and leisure
- 18% — Working full time
I can see how the first two would work, but I’m still struggling on how working full time is compatible with being retired.
Maybe those 18% of people see it as they are “retired from their career” and are working full time at something else?
Worries in Retirement
Now all is not rainbows and butterflies in retirement.
The study says that retirement is “a positive time in life, but not without worries.”
What are those worries? Here are the top ones:
- Physical health — 49%
- Cost of health care/long-term care — 34%
- Unexpected expenses — 32%
- Economic conditions (e.g. recession, inflation, taxes) — 32%
- Outliving my savings — 26%
- Mental/brain health — 25%
- Becoming a burden on my family — 21%
- Isolation/loneliness — 13%
Some thoughts on these:
- As we’ve discussed above, having concerns about being healthy are legitimate concerns. This is why I would say exercising is one retirement activity that almost everyone should spend some time on. IMO it’s better to pay the trainer than pay the doctor!
- “Cost of health care/long-term care.” I’m going to break this one out from the next three because it’s an issue almost everyone mentions — including millionaires I interview. Options I see for dealing with it are: 1) plan for the costs to be large and plan to pay for them, 2) keep income low and try to qualify for subsidized insurance through the ACA, 3) consider an alternative like a health share, and 4) work enough to get coverage. Of course, if you’re old enough when you retire you can tap into Medicare.
- “Unexpected expenses, economic conditions, outliving my savings.” These are reasons you really want to 1) get a good handle on income/assets and spending in retirement before you retire and 2) build in as many (and as large) margins of safety as possible.
- “Mental/brain health.” I think this is a valid concern but not sure there’s any proven way to deal with it. Some studies will point to exercising, staying active/curious, and having intellectually challenging hobbies as things that could help. If you have other suggestions, please share them below.
- “Becoming a burden on my family.” All you can do is all you can do. If you do “all the right things” and still need help from family, that’s just the way it is. FWIW, this is an area where money can help — either in paying for outside help or offering to pay family to help you (which would make the “burden” much more bearable for many family members.)
- “Isolation/loneliness.” A couple recommendations: 1) Develop a social network before you need it. If your spouse is your only social connection and they pass away, you’re left high and dry. Then your only alternative is to… 2) Get out there and create some new friendships. Go to the gym and church, play pickleball, join some clubs, etc. I can guarantee that sitting at home alone watching cable news 12 hours a day will not combat your loneliness.
That’s it for this time.
To read the next post in this series see The Four Stages of Retirement.
M24 says
Retirement to me means “my time is no longer for sale.” I own it 100%.
Paul says
I love this!