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Despite major challenges including a pandemic, market volatility and rising costs, most recent retirees feel good about their current financial situations. According to the latest Fidelity Investments State of Retirement Planning study, 72% of recent retirees said their retirement is going as planned, and 70% said they have saved and planned appropriately for a comfortable retirement.
Pre-retirees are not feeling as optimistic, however. According to the report, 62% of Americans in their retirement planning years are uncertain whether their retirement savings will last forever.
Here’s a closer look at the possible reason for this generational divide, plus, what pre-retirees can learn from current retirees.
Current Retirees vs. Pre-Retirees: A Gap in Financial Confidence
The report found that most current retirees believe they have saved enough for a comfortable retirement, while the majority of those in the planning stages believe they will run out of money in retirement.
“The optimism many current retirees feel can be attributed to the fact that a majority of them have access to multiple sources of predictable retirement income, like pensions and Social Security,” said Rita Assaf, VP of retirement products at Fidelity. “This helps make budgeting for things like housing and food a lot simpler, since their living necessities are covered by a fixed stream of retirement income each month.”
Many current retirees can cover all their needs with pensions and Social Security, allowing for wiggle room in their budgets.
“Their retirement savings can be used for their discretionary expenses — those ‘nice to haves’ that so many envision during their golden years — like travel and hobbies,” Assaf said.
Financial Lessons Pre-Retirees Can Learn From Current Retirees
While current retirees may have a financial leg up over future generations who may not have access to the same guaranteed income sources, there are still some valuable lessons pre-retirees can learn from this generation.
According to Assaf, “Our study finds the top pieces of advice retirees have for people who are starting their retirement [preparation] include:
- Starting to save as early as possible, even in small amounts
- Taking advantage of employer-sponsored retirement plans like 401(k) [plans]
- Paying down high-interest debt before focusing heavily on retirement savings
- Making sure you are educated on Social Security and retirement benefits in general.”
Retirees also offered advice specifically those who are nearing retirement age.
“For those just five to 10 years out from retirement, retirees say some of the best actions you can take include:
- Paying off any remaining debts, like mortgages and credit cards
- Maximizing contributions to retirement accounts
- Leveraging catch-up contributions when possible
- Planning for healthcare costs, including Medicare and long-term care
- Practicing living on a retirement budget to prepare yourself for a reduced retirement income.”
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