The most important thing a pre-retiree can do to ensure a successful retirement is create a written financial, health and emotional plan for the retirement years—and then create a Plan B for when the first plan doesn’t work out, according to Catherine Collinson, CEO and president of the Transamerica Institute.
The most important thing policymakers can do to help pre-retirees is share information with them about the future of Social Security, Medicare and long-term-care insurance so that planning can be done based on knowledge of these important factors, Collinson said in an interview.
Transamerica recently conducted its 23rd annual retirement survey. The resulting study, “Life in Retirement: Pre-Retiree Expectations and Retiree Realities,” was based on responses from 2,546 workers age 50 and older who were employed, self-employed or unemployed but looking for work, and 2,104 people who were retired.
“This report is a cautionary tale for near retirees who need to take a hard look at their areas of success and vulnerabilities to see if they can afford to retire,” Collinson said. The Transamerica Institute, which she heads, includes the Transamerica Center for Retirement Studies.
Collinson oversees research, publications and outreach initiatives for the institute. She’s also a radio host.
“The more we can put these issues front and center, the more we can inspire people to take action to help assure a successful retirement,” she added. “And the more successful current retirees are, the more they can inspire younger generations to take action.”
Two-thirds of near retirees envision working longer than past generations or do not plan to retire at all, but life frequently prevents that from becoming a reality. “Many people are forced to retire earlier than expected, and they need to have a plan in place based on current income, projected income and expenses,” Collinson said.
Besides recommending that pre-retirees write a retirement plan—the study also says they should pay off debts and avoid taking on new ones, especially high-interest-rate credit card or consumer debt. “For those with mortgage debt, [they should] determine the optimal approach for paying it off,” the report said.
Many retirees should consider an encore career, part-time work or even volunteer work to bring additional income in their retirement years. Such work can also give them emotional satisfaction.
Social Security and Medicare can seem complicated, so near retirees should learn about the different claiming strategies to maximize their long-term benefits.
Their budgets should include options to modify their homes so that they can age in place when they retire. They should also consider the possibility that they will need long-term care, the study said.
Transamerica recommends that pre-retirees “identify and enlist trusted loved ones and have frank conversations about your wishes and concerns” to ensure a smooth transition. At the same time, any legal documents that are needed should be executed, including financial and medical powers of attorney.
Transamerica advised those near or in retirement to take good care of their health so they can better enjoy their retirement years. They must also be vigilant about people’s attempts to defraud them.
Not all of the burden falls on the retirees themselves. Policymakers also have an important role to play.
“One of the most important things for policymakers to do is assure Americans that Social Security is not going to go bankrupt and address the shortfall in the Social Security trust fund that could affect benefits in the future,” Collinson said. “If people know in a timely manner what could happen, they can adjust their plans.”
Policymakers also need to ensure that Medicare is sustainable for future retirees, and to foster innovation in the long-term-care insurance industry, she added. And they need to take action to ensure that accessible and affordable quality healthcare options and prescription drugs are available to all Americans, including retirees.
Furthermore, policymakers should support lifelong learning, including people’s ongoing professional development, retraining and acquisition of new job skills. This education should include financial literacy.
Employers, meanwhile, should implement age-friendly business practices, and (as part of their diversity efforts) remove disincentives for hiring and retaining older workers, the report said. They should also add retirement plan features that prompt workers to save more—by increasing catch-up contribution limits, for instance, or by increasing age limits for required minimum distributions and expanding their employees’ automatic enrollment in retirement plans.
“Policymakers have an imperative to strengthen the U.S. retirement system for Americans already in retirement, those nearing retirement, and workers of all ages,” Transamerica said.
Collinson noted some positive trends in the report.
“We included what we call our happiness questions,” she said, “which showed that retirees are able to engage in activities that they would not have previously had time for, such as under-taking health activities, and they have a strong sense of purpose.
“The transition to retirement is not always an easy transition, particularly if life dictates something other than what they had planned,” Collinson added. “But with the help of professionals for financial planning, healthcare and emotional well-being, retirement can be a happy invitation to explore new opportunities.”
The report can be found here.