Many retirees—even those who saved—are living on the financial brink, according to a study released Tuesday by the Transamerica Center for Retirement Studies.
Of the 2,043 people age 50 and older who are either retired or semiretired and were part of the study, only 46 percent said they have built a large enough retirement nest egg to live comfortably through a long retirement.
“Retirees' circumstances regarding when and how they retired exemplify common risks: employment issues, ill-health and financial need. They offer a cautionary tale for those currently in the workforce on the importance of maintaining good health, financial planning and competitive job skills," said Catherine Collinson, CEO and president of Transamerica Institute and of the Transamerica Center for Retirement Studies.
The study, “A Precarious Existence: How Today’s Retirees Are Financially Faring in Retirement,” showed that retirees are engaged and have a positive outlook on life. However, they are still financially vulnerable.
They’re vulnerable because many were forced to retire earlier than planned, which cut short their earning years and required them to make disbursements from savings and investments earlier than anticipated, Collinson said.
Sixty-six percent of retirees said Social Security is their primary source of income in retirement and many of those started receiving benefits at age 62, which reduces benefits for the lifetime of the recipient.
Retirees’ median household income is $32,000, while 25 percent have a household income of less than $25,000 and only 15 percent have an income of $100,000 or more. At the same time, many are still paying off household debt. Forty-five percent have non-mortgage debt and 28 percent have mortgage debt. At the same time, the median savings excluding home equity for retirees is $75,000 and 31 percent have savings of less than $50,000.
“Retirees are already living within limited means and risk outliving their savings. How would they be able to cope with a financial shock such as long-term care expenses?" Collinson asked.
Long-term care could be a major expenditure for many retirees, but only 12 percent have long-term-care insurance. Fifty-five percent of retirees are not confident they could pay long-term-care costs if they needed it. Forty-nine percent plan to rely on family and friends for long-term care and 30 percent plan to move to an assisted living community or nursing home. An alarming 24 percent do not have any plans for such care, the study said.
“Some retirees could have been better at saving during their working years, while others may have done everything right and still find themselves facing a savings shortfall,” Collinson said. “When they started their careers decades ago, the retirement landscape and planning-related assumptions were very different, and they will continue to evolve. Individuals now need to do more to prepare themselves.”