You may have seen the CNBC big story late March 2017 that consumer confidence soared in March to its highest level since December 2000. "Consumers' assessment of current business and labor market conditions improved considerably," Lynn Franco, director of economic indicators at The Conference Board, said in a statement on March 28, 2017. "Consumers' also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects. Thus, consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months," Franco said.
You have come to depend on us to help you separate the news from the noise. So while some Americans are more confident than ever others have real reasons to worry. According to the Employee Benefit Research Institute only 18% are very confident they will meet their income needs when they stop working. In fact, 30% are so stressed out on the job thinking about their finances they can’t stop worrying about their future while at work.
“It’s great to have Social Security checks arrive each month and not to have to worry about being fired or laid off,” said Craig Copeland, senior researcher at ERBI in a Chicago Tribune article on March 24, 2017. Copeland went on to say that despite the concerns the study found many working Americans who may be more confident than they should be. Baby boomers, for example, who age from 53 to 71 in 2017 is the group closest to retirement, but ‘just 57% are likely to have the savings they need to last through retirement,” contends Copeland.
The EBRI researchers were surprised to see there is little difference between workers, whether older or younger. “Based on their savings, calculated from the present into the future, about 43% of each age group is going to fail to have what they need,” Copeland said. When we aren’t complacent, we love to procrastinate. Among those saving for retirement, EBRI saw evidence of stress coming from the fact that people aren’t sure if they have saved enough, or worse, knew they were far behind. Does this sound familiar? Approximately 54% promised themselves they would save more sometime in the future. Of course you are not surprised that without a date on a goal “later” never shows up. The EBRI survey found that 57% intended to work longer and retire later, but it’s wishful thinking too. “Surveys of current retirees have shown that most people who had planned to work longer were forced by health issues or layoffs to give up on that plan,” according to the study.
Thanks to a 2012 AARP analysis of data from the U.S. Census Bureau, for those 65 and over Americans the average retirement income was $31,742, with 84% those who received Social Security getting a monthly benefit of $1,299 per month. Jeremy Bowman on April 24, 2016 at The Motley Fool submits, “Social Security provides more than a third of income for many retirees, and retirees in the lowest income quintile count on Social Security for more than 80% of their income.”
According to me, you can’t fool Mother Nature or Father Time. As we have shown here in several segments when looking at the U.S. Census Bureau data, as Americans reach their mid-60’s average household income and spending looks like a water fall. If the income is in the mid-$30,000s from 65 on I don’t imagine there is much interest in or desire for buying much of anything anymore.
Social Security remains the principal income source for many retirees. Yet, Bowman declares, “Nearly 30% of retirees count on savings either from their own accounts like 401(k)s or through pensions from their employers.”
4 Things you can do now.
1. With interest rates low identify vehicles that may yield 3-4% or more.
2. With 10,000 people a day turning 65 through the mid-2030s according to Jeff Hansen, CEO, Griffin American Healthcare REIT, consider positions that are dedicated to addressing rising health care needs.
3. Avoid 100% hate or love for anything investment related. Look into suitable investments that may provide consistent income.
4. Check your assumptions no less than annually.
“Another flaw of the 4 percent withdrawal rule is the assumption that the investor earns precisely the underlying market return. The evidences suggests that many older investors actually lag behind average market returns. They tend to exhibit poor decision making, selling after market declines and buying after the market has gone up, and with age, it becomes increasingly difficult for them to rebalance a portfolio, as to decide how much to spend and manage through a market downturn. Research has shown that older investors have underperformed in risky investments on average of 2% per year,” say authors George M. Kornialis and Alok Kumar, Do Older Investors Make Better Investment Decisions?
In closing, determine today how you want to live or continue living “in retirement and build the most efficient strategy that can allow you to get the most dollars from your savings and investments in the most reliable fashion possible,” said Michael Finke, Ph.D., a contributing editor Research Magazine.
The opinions voiced are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.
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