Is There Really An Impending Retirement Crisis?

The news and the corresponding statistics don’t look promising as far as future retirements are concerned. Many workers are currently living paycheck to paycheck and not even half of all adults would be able to cover an unexpected $1,000 expense. With debt and living expenses on the rise in much of the country, the importance of setting financial goals, such as saving for retirement and sticking to those goals — has never been greater.” (click here for related article)

It is true many workers will have a lot of catching up to do in retirement given their current savings. Forty percent of workers report that the total value of their household savings and investments, excluding the value of their primary home and any workplace savings plans, is less than $25,000. This includes 19% who say they have less than $1,000 in savings. (click here for related article)

The worst statistics are for America’s middles class. In 10 years, more than half of middle-income Americans age 75 or older will not be able to afford to pay for yearly assisted living rent or medical expenses, according to a study published Wednesday in Health Affairs. Most middle class seniors may be unable to afford basic living expenses by the year 2029 (click here for related article) That’s 10 years away!

By 2029, more than half of the middle-income seniors will have annual financial resources of $60,000 or less, even if the equity in their homes is included. Projections put the average annual assisted living and medical expenses cost in 10 years at $62,000, meaning that a majority of the middle-income seniors then will not be able to afford an assisted living facility.

If you were to ask me for my opinion, based on my own experiences and the fellow retirees I meet most days, I’d have to agree with these startling statistics: I see an impending doom and gloom for many, many future middle-class retirees. No. We’re not going to make it. Unless we make some changes now!

“The low-income retiree has been taken care of by tax subsidies, while the high-income cohort is largely self-sufficient. But the middle-income seniors have no protections” Many retirees, me included, retire too heavily on Social Security (click here for related article) And I am one of the lucky ones: I have the three legged retirement stool to depend on: a pension, investment income and Social Security.

But because I see things like this, makes me quiver when I think of my financial future:

spices
The bottle on the left holds 1.35 oz of spice priced at .99 cents. It’s new replacement bottle holds .75 oz off the same spice for .95 cents. I’m paying almost the same price for almost half of what I used to purchase. This isn’t inflation. This is insanity!

I see extraordinary price increases in almost every single thing I either need or want to buy with absolutely no end in sight. This includes medical expenses, drug expenses, housing costs, utility bills, all insurance premiums, taxes, future vehicle expenditures and most importantly the rising costs of food and groceries. I am astounded at the exorbitant fees I have been forced to pay now that I have settled into a fixed income routine. How do people on fixed income survive?

Technically, my family retirement really won’t start till hubby turns 65 in under three years. I realistically can’t see our savings tiding us over into our retirement years. We will eventually be forced to sell our home and downsize considerably just to continue to make our ends meet.

So, YES! I do see an impending retirement crisis looming because if I can feel it, so can all of you. It’s there. We need to recognize it and start to form a strategy on how we are going to meet the new financial challenges of our retirement futures.

Currently, hubby and I have given up on some of our retirement dreams. Owning two homes is totally out of the question. Florida turned out to be more expensive to us than living in upstate New York actually is. I just wish it weren’t so cold up north. We still can RV in Florida for the winter but it has to be in state and national parks. I’ve stopped joining photography clubs because I don’t have the funds to keep up with the ever changing digital technology nor do I have the financial resources to enter competitions. I’ve downsized to water coloring and have found equal satisfaction in my new hobby when compared to photography. Plus, my wallet is intact.

My husband’s dream was to get back involved in sailing but truthfully, even if someone gave hubs a sailboat for free, we couldn’t afford the upkeep nor the launching nor mooring. Even day sailing costs money. Money that we can never earmark for sailing. Hubby has since taken up ham radio. He studied, got his license, accepted some hand-me-down ham radio equipment from his friends and is quite content to speaking to people all over the world, thanks to his new ham radio hobby.

We’ve totally given up meals out (this was a very hard habit for me to break!) We’re doing more DIY projects around the house. We’ve been forgoing hiring contractors or any assistants for any endeavor. Hubs is back fixing and maintaining our cars. I’m cleaning more, gardening more, cooking more and complaining more (LOL!) Technically, we’re only in to this ‘forced’ fixed income living since March 2019, when hubs turned 62. If he had collected Social Security like he wanted to at 62, this is what our lifestyle would have become. Instead, we’re waiting till hubs turns 65 so as to collect more in his Social Security benefit. In the meantime, we have voluntarily chosen to live like this had we been on a fixed income. And people, it’s super, super hard!

You can read all the articles you want regarding retirement. But until you actually live in retirement and realize all the retirement challenges that await, you have no idea what you’re in for. Retirement, to me, was something that lurked far off in the distant background. It was never a reality. Sure, we saved for it. We thought about it. We planed about how we’d live, what we would do, how we would spend our time and yes, spend our money. Yet until you are actually in the throes of an honest-to-goodness retirement, you (meaning ‘me) have absolutely no idea what anyone was talking about.

Life may be short but retirement is longer.

My advice? Same as it always was: buy a house no later than age 35, live in it for like forever (make sure it can grow with your upcoming changing lifestyle without expensive remodeling), never ever borrow out your precious equity, do all the maintenance and repairs yourself (watch You Tube videos). Then, when you are 65 you’ll have a paid-for home (based on a 30 year mortgage). Stay as clear out of debt as humanely possible. Buy used cars for cash or very low loans and hold onto the cars for at least 10 years. Make your kids pay or borrow for their own college educations, make them save their money and pay for their own weddings. Yeah, you may feel guilty if you don’t pay (and pay and pay) but trust me. When you’re old and feeble your kids will have their own lives. They aren’t coming to help you nor save you. Worry about yourself. Your kids can fend for themselves.

Lastly: save, save, save, save. It’s an awful feeling to be in the throes of retirement only to think back on all your foolish financial mistakes (buying new cars, mortgaging homes you couldn’t afford, taking those exotic BUT super expensive vacations, buying stuff you can’t even remember now of owning, student debt, not contributing to a 401K plan that had an employer match your investments….you get the idea) I’ve always been a frugalista and I always watched our bottom line. But a couple of times out there, I made some financial boo boos and I feel that pinch every once in a while.

Hey! You can’t go backwards but you can certainly go forward. If there’s anything hubs and I have done right, it is this house we are living in. A gift from God, no doubt. We’ve cared for it well and it will one day care for us as well. For this middle-class couple, our home proved out to be our greatest accomplishment yet towards achieving true retirement goals.

Live well and prosper, my friend. Live well and prosper.

18 comments

  1. reading your post Cindi made me smile, laugh and feel like throwing up. i have made so many mistakes financially and with no amazing memories or vacations to happily reflect upon. you gave amazing advice. i so wish someone would have taught me about money when i was younger. we have so much catching up to do in a very short time. at the grocery store today and it was down right scary. thanks for another great post.

    Like

  2. You hit the nail right on the head. Your complete article is so correct. We are doing the same thing. And yes I have noticed the prices going up but the product packaging getting smaller. I just quit buying most of my old favorites. Good article,

    Like

  3. Retirees were impacted the most from what I call the big squeeze –
    1. pittance for interest on our savings,
    2. inflation on basic needs,
    3.crazy credit card interest rates
    4. Relying heavily on a fixed income (SocialSecurity) that hasn’t risen because of manipulation of the cost of living figures and then increasing Medicare payments when they do get an increase cost of living.
    This contrast to the Increasing wages of those still working helping them stay even.
    A fixed income retirees need to be proactive and work to increase their passive income, reduce their discretionary spending, and set at least 5% better yet 10% of current income for future inflation always living below their means. Retirees need to get out of paltry paying checking and savings accounts. At brokerages, new issues one month CDs are paying 2.25%. Ladder CDs with different maturity dates. Have at least one rewards credit card that you pay the balance off in full each month as an emergency backup while the CDs mature if necessary. So stop letting the banks use your money at .01 to.049 % interest, and start investing it in something that keeps up with inflation.
    If you are decluttering try getting some money for the items you are getting rid of. Sincerely Lara

    Like

    • Lara, I’m earning 4.21% on one CD (10 years) that holds ALL of the money I made from the sale of my Florida condo. It is a Godsend. These huge interest rates on CD’s and other Wall Street investments wouldn’t have been possible for us retirees if it weren’t for the Commander In Chief in office right now. I also keep my emergency funds in a Treasure Bond Money Market paying 2% PLUS a monthly dividend that can be used to pay my bills if need be (I use a bank) PLUS it offers a Visa debit card.
      In other words, the economy has never been this good for us retirees in a very long time. That’s about all I can care about. If A Prez is delivering these great earnings to us then I say let it rip. The value of my home went up another $100,000 in the last two years with no end in sight. Everybody around here is doing well, have money, money, money and they’re spending, spending, spending. ‘Bout time! I’ve got 2 other CD’s reaching maturity soon. Instead of earning a paltry 1%, I am going to roll them over and earn 3%. That’ll make a big, big difference in my bottom line. Tax free.
      The economy is roaring right now. Everyone should just shut up and enjoy it.
      OK. My rant is over.

      Like

      • What’s the Fidelity symbol on that Treasury Bond Money Market account?
        Yes there are a lot of better income products now. Hallelujah! Your article was full of gloom and doom. I am glad that in your comment you emphasize your personal improvement of income because you took my advice to check out Fidelity brokerage CDs. It’s great that your home has increase that much. I hope it continues. I hope your readers check out making more with their savings.
        We will have to see how the threaten tariff issues play out. Sincerely, Lara

        Like

      • Lara, I’ll email you the symbol.
        We’re hoping that when Nick turns 65 in under three more years, the value of our home jumped to at least $500K. That’ll make a very nice retirement fund for us. It’s just sad that the only way to get at that money is to sell our home. It’s apparent that the cash reserves I have now will NOT carry us in to our 80’s or even our 90’s. That, to me, was the gloom and doom part. Just don’t have enough. 😦

        Like

    • Optimization of your efforts to increase what your money- your employees make for you. Prioritize on your to do list -checking if they are all working hard for you. I Am appalled by how much money people leave in checking accounts different statistics are $3000 to $7000! Mainly paying zero! Seniors even as low as age 50, can usually get totally free checking and a $100 minimum balance. Swapping where you direct deposit your pension or SS can also make you bonus money. Most of the top banks have preferred stocks and bonds that pay interest quarterly at 5 to 8.75% interest. They are currently priced at $24 to $29 a share. Go for the higher interest ones for your long term money and take advantage of their price swings to buy and sell with their variance around their dividends pay dates. Look at their charts to see what I mean. I have also invested in preferred stocks and a retired IBM exec put me on to this last May. Almost a year now and I am a believer!
      With lower tax rates take advantage of converting traditional IRAS to Roth IRAs and start a tax free income stream before you start Social Security or minimum required distribution fill up those lower tax brackets now while we have them. This Roth income is not part of the Social Security worksheet to determine how much SS is taxable. You can’t transfer your MRD to Roths but you can add above this to a Roth if you still have room in the lower tax bracket. Be aware of the maximum income levels to not have Medicare premiums increases. As a widow or single tax payer now I wish we started Roth conversions before my husband died.
      Recently Cindi wrote about the great offerings at libraries and two I used are a neighboring town’s coupon file for manufacturers coupons and free vegetables seeds.
      They also have all the newspapers and magazines free and I still like to sit with the hard copy in my hands. Lara

      Like

      • Lara, I read tons of magazines each month for free, online, through my library. I love it because I love magazines! I read Kiplinger, The Atlantic, Readers Digest as well as Cosmo, House Beautiful, HGTV, Woman’s Day, etc. as well as some cooking, backpacking\hiking, travel mags. LOVE IT!
        All my CD’s are in ROTH IRA’s. I keep rolling them over and over.
        My checking/savings account is free through the bank as long as my SS is auto deposited there monthly. Paying my bills through online service has been ideal.
        For the first time ever in my lifetime, I think I am doing AOK with all of this stuff. It’s nice making money off of your money. It’s good being fiscally conservative. It’s been a thrill watching my money grow vs the other way around.
        Thanks for your input. I’m going to check out your recommendations.

        Like

  4. I have always been fiscally conservative and have only 20% invested in equities and this is now in high interest paying preferred stocks. I expanded my fixed income investment to include REIT preferred stocks and individual preferred bonds along with the CDs. If I live as long as my parents My retirement will be 43 years long and I am at year 21. So my expenses will probably be double at least in my eighties and being proactive now will secure being able to afford then.
    I set goals in what I was hoping to accomplish with this new structure and it has surpassed all my expectations. FYI:The preferred stock I told you about between dividends and capital gains made me 20%. 😊 Different stokes for different folks. Lara

    Like

    • You’re doing very well Lara. I’m jealous. I wish I had the guts and determination that you do. But I’m all done with risk. Trust me….if I invested just one penny in the stock market, it would crash within the hour. That’s the kind of luck I have. Just can’t do it. Not at this point in my life. 😦

      Like

  5. The coming decades will be very difficult for middle class seniors. There is a bill currently proposed — The Social Security 2100 Act —which aims to protect Social Security for our generation and the next. It’s critical to maintain Social Security since so many middle class seniors will rely solely upon it. You can learn more about the bill on our Facebook page @thegoodlonglife / Lifelong Care Network or on the website of John Larson, sponsor of the bill.

    Like

    • I heard about this bill but wasn’t sure about it’s content. Thanks for the info. Protecting Social Security is tantamount for seniors surviving retirement.
      Thank you for your comment.

      Like

  6. I would recommend that people who are at any stage of their lives, but most especially while they are still working, develop the most comprehensive budget they can imagine for life in retirement. Got a pet? Include costs for food, training, boarding while you’re away, routine veterinarian visits, pet insurance, etc. Got a house? Think about maintenance and upkeep like a new roof or hot water heater or septic system. Got a car? How about budgeting for your health needs. Knees and hips wear out. Eyes and ears eventually start to fail. Cancer prevention screenings need to be done (colonoscopies, mammograms, prostate exams, skin screenings), Take medications? If not yet, you likely will somewhere down the road. Got kids and grandkids? Love them with all of your heart and then think about the possibility of them needing your help in the future.

    This is just a start. Everyone’s list is specific to their own lives. My point in doing this exercise (and I have) is to get a clearer sense of the realities of living in retirement. It’s meant to inform and enlighten. I know it did for me. It also highlighted that I may fall very short of my long-term needs so I have to tighten things up now, pick up more side work (even though I’m retired from my 30+ year career, I still do some work now and then), try to sell some things, and keep a sharp eye on my budget (which I do every day). Living in denial about any of this could spell financial disaster.

    “If you fail to plan, you’re planning to fail” – Benjamin Franklin

    Like

    • Hi Lisa. Great advice. I didn’t calculate adequately in home upkeep and repairs. That’s because our home is brand new. But time passes quickly. We’re living here 18 years. That’s not brand new anymore. Kitchen Appliances had to be replaced. Repairs had to be done. Soon washer and dryer. Hot water tank. Boiler. Roof. UGH. I had no idea.
      That’s the only thing I miscalculated. That’s because I thought we’d be somewhere else new by now. Wrong.
      Thanks again for your comment.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.