Many advisors’ clients are trading in the gold watch for the freedom to do things in their senior years, including keeping working if they want to, according to the Transamerica Center for Retirement Studies report released Wednesday.
The new definition of retirement means freedom to do things to more than half (53 percent) of employees, Transamerica said in its report, Three Generations Prepare for Older Age. In addition to freedom, 53 percent of the nearly 6,000 consumers polled said that retirement means enjoyment and 43 percent said it means being stress free. The survey included full- and part-time employees divided among baby boomers, generation x and millennials.
“Today’s workers expect to extend their working lives beyond age 65. Their vision of retirement balances continued work with freedom and more time to pursue personal interests,” said Catherine Collinson, CEO and president of Transamerica Institute and the Transamerica Center for Retirement Studies.
Retirement still has positive connotations for 86 percent of workers, while 37 percent said they associate some negative attributes to the new phase of their lives. Fifty-five percent plan to continue working, most for financial reasons or for healthy-aging reasons.
Forty-four percent of workers envision a phased transition into retirement during which they will reduce work hours with more leisure time to enjoy life (27 percent), or work in a different capacity that is less demanding or brings greater personal satisfaction (17 percent). Another 22 percent plan to continue working as long as possible until they cannot work anymore.
The fly in the retirement ointment is finances, according to Transamerica. “In addition to preparing for longer lives and more time spent in retirement, workers are increasingly expected to self-fund a greater portion of their retirement income as a result of the evolving retirement landscape,” said Collinson.
Although 75 percent of workers are saving for retirement through employer-sponsored plans, many are not saving enough. Workers of all ages have saved a median amount of $50,000 with baby boomers having a median $152,000, generation X a median $66,000 and millennials a median $23,000. Eleven percent of workers do not have any household retirement savings.
Even among those who have retirement savings accounts, 29 percent have dipped into the accounts by taking a loan, early withdrawal or hardship withdrawal. To make matters worse, workers of all ages have a median emergency savings of only $5,000.
Many people in their working years also have become caregivers, which raises its own financial concerns. Twenty-eight percent have been caregivers during their working careers, for either children or aging parents. Among them, 86 percent have made some sort of adjustments to their work situation as a result of becoming a caregiver.
“Despite the all-too-real challenge of saving, many workers are overlooking opportunities that could help improve their long-term financial situation,” she added. “Small steps such as using a retirement calculator to estimate savings needs, engaging in financial planning, creating a budget, formulating a retirement strategy, and learning about retirement investing can make a big difference in the long run.
“In the hearts and minds of today’s workers, retirement means ‘freedom,’ amid concerns about whether it is financially attainable,” said Collinson. “From a societal perspective, how can we ensure flexibility for people to live their lives and retire on their own terms? How can we improve financial security among all? These are questions begging to be answered by our society – and by each of us on a personal level. Ultimately, retirement is what we make of it.”