The majority of retirees and pre-retirees will not have sufficient savings to retire by the age of 65, and that such groups are not financially prepared to enter retirement. This is according to a new study released this week by the Stanford Center on Longevity (SCL), which was supported by leading reverse mortgage lender Finance of America Reverse (FAR).
“Of those surveyed, the median retirement savings were valued at $128,000 and more than half (55%) of respondents reported their financial situation as fragile or being just able to get by financially,” an announcement of the survey results reads. “Since most financial advisors suggest spending no more than 4% per year of invested savings, that equates to just $5,120 per year that the majority of retirees could safely withdraw from their investments to supplement other retirement income sources.”
Nearly half of all surveyed pre-retirees (46%) indicated that they were making the choice to retire based on their age, not necessarily on their financial situation. Nearly a third of respondents (30%) reported the complete absence of a plan regarding the time at which to retire, which could result in early depletion of assets before a senior passes away.
“So many Americans manage their finances on their own for years without any advance planning, only to then find themselves ill-equipped for the surprises, frustrations, and sheer expense of sustaining a 30-year retirement,” said Steve Vernon, a consultant with SCL and co-author of the study. “The invaluable insights from this survey illustrate where a strategic, multifaceted approach centered around financial literacy and engagement, step-by-step expert guidance from wealth planners and advisors, and empowering messaging for retirees can truly make all the difference in building a financially secure future.”
The necessity for a change in the thinking around retirement is growing more prevalent with each passing year, adds FAR President Kristen Sieffert.
“We are living in a time of transition, marked by longer lifespans, increasing housing and healthcare costs, more volatile markets, but also encore careers, lifelong education, and a redefinition of life after 60,” she said. “The insights from this study help inform our work with financial advisors and consumers alike, underscoring the importance of planning ahead and of home equity as a central financial tool for the new realities and possibilities in retirement.”
SCL indicates that future studies in conjunction with FAR are also possible in the future.
“We look forward to continuing our vital work with support from organizations like FAR so that more Americans are equipped with the tools and support they need to create healthy, vibrant lives throughout their retirement,” said Martha Deevy, associate director and senior research scholar at SCL.
Find the full report at the SCL website.