Getting Ready to Retire
Al Waller: 2024 is Peak 65. Now, what is Peak 65, you might ask? It is a major demographic milestone during which more Americans will turn the traditional retirement age of 65 in the same year than ever before. On average, 12,000 Baby Boomers will turn age 65 every day in 2024 and many of them may have retirement on their minds.
Joining me today on ClearPath – Your Roadmap to Health & Wealth℠ is Catherine Collinson, founding CEO and president of nonprofit Transamerica Institute® and its Transamerica Center for Retirement Studies to share her team’s survey report on Life in Retirement: Pre-Retiree Expectations and Retiree Realities. On this third and final part of a three-part series, we’ll be discussing how to get ready to retire.
Before we get started – a reminder that we would love to hear from you and learn what topics you would like us to cover or give us feedback on today’s show. Please drop me or Catherine a note at [email protected].
Catherine, millions of Baby Boomers are entering retirement and the oldest Generation Xers are in their late fifties, so it’s nearing for them, too. What should they be doing to prepare themselves for retirement?
Catherine Collinson: Retirement planning is about more than just money. It’s about planning for a long life. There’s an emerging trend called longevity planning. People have the potential to live longer than ever before which means they could spend 25, 30, or more years in retirement.
Over the years, our research has found that workers associate retirement with the freedom to choose how they spend their time – and many want to continue working at least part time and, presumably on their own terms, and retire at an older age.
Creating a longevity plan for how to use this windfall of time requires reflecting on your values, priorities, and what’s most important to you – so you can ensure they are well-aligned with your expenditures of time, energy, and resources. These are deeply personal questions that only you can truly answer for yourself.
Creating this plan is an invitation for envisioning new possibilities. One new possibility can lead to another, especially when past employment-related restrictions become no longer applicable.
Al Waller: That sounds exciting, but it also sounds scary. In my own personal experience and in my career as a human resources consultant, people have difficulties in clarifying and setting personal goals – because it requires letting go of old habits, assumptions, and background noise even if they are no longer serving them. In short, change doesn’t come easily.
What is the most important tip you can give someone?
Catherine Collinson: Find your purpose. For many people, including myself, our careers have brought a great sense of purpose and satisfaction. Retirement can bring a major void, if you don’t have your sights set on new areas of purpose.
There’s a growing body of evidence among academic researchers that a higher sense of purpose is associated with a lower risk of chronic conditions and premature mortality. Having a strong sense of purpose is important at all ages and especially older age.
If you’re not sure what your new purpose – or purposes – might be, make a list of the things that you love doing, and make a list of things you’ve always wanted to do but could never find the time. Consider getting involved in your community, doing volunteer work, joining a group or club based on an area of interest, or taking a class are excellent starting points.
Al Waller: Indeed, I knew I didn’t want to be idle in retirement because I always felt compelled to champion a call whether recruiting talent for a client, leading fundraising initiatives for one of my alumni Associations, or simply volunteering in my local community. As I’ve shared, I was fortunate enough to become associated with ClearPath – Your Roadmap to Health & Wealth, which has enabled me to continue to advocate the causes for health and financial wellness.
Now, once someone has formulated their vision of how they want to live and spend their time, it may be time to figure out how to pay for it, right?
Catherine Collinson: Al, you’re exactly right. I’ll add that having an exciting vision of the future is a strong motivator for financially planning for it.
Al Waller: Now, you’re going to remind me that most people are not yet financially planning.
Catherine Collinson: Fewer than one in four age 50+ workers (23%) – or pre-retirees – have a financial strategy for retirement in the form of a written plan.
Al Waller: What should our listeners be thinking about when creating a financial strategy?
Catherine Collinson: A solid strategy should take into account your current savings and investments, expected sources of retirement income, a budget for everyday expenses, funds for pursuing your dreams, and health care expenses and the potential need for long-term care.
Other important areas of focus should include investment returns, inflation, and taxes.
A new hot topic in planning is climate change, especially if you live in a so-called peril zone that is subject to hurricanes, floods, fires, etc. In these areas, homeowners insurance premiums are skyrocketing – if you can still get coverage. There are also potential costs associated with damage and repairs and, if disaster strikes, the need to move.
In creating a plan, the number of your expected years in retirement is central to the modelling because it dictates how long you will need your savings and investments to last. Pre-retirees have a strong sense of when they expect to retire, but when asked how long they’re planning to live to, almost half (47%) said they were “not sure” – which is reasonable but not helpful for financial planning.
Lastly, it's also critically important to have contingency plans if you find yourself forced into retirement sooner than expected due to health issues, job loss, or other extenuating circumstances.
Al Waller: For our listeners out there, we recently dedicated an entire episode of this podcast to Strategizing for Retirement Explained, if you’re interested in learning more. Let’s delve a little further into some of the details, especially as they relate to pitfalls. What are some common pitfalls that pre-retirees should avoid?
Catherine Collinson: Pre-retirees’ greatest retirement fear is outliving their savings and investments, according to our survey findings. A common pitfall is retiring without a drawdown strategy for tax-advantaged retirement accounts that contemplates potential forms of guaranteed retirement income, the most common being an annuity. As noted, fewer than one in four have a financial strategy for retirement. What’s more, only 37% currently use a professional financial advisor. This is surgical and having an advisor is worthy of consideration. At a minimum, check with your employer's retirement plan provider to learn their perspectives and their resources to help you envision a drawdown strategy.
Another common pitfall is a lack of understanding about Social Security claiming strategies that can optimize and maximize benefits. Our retiree survey found that many were claiming Social Security benefits before their full retirement age and, by doing so, they were receiving a significantly lower monthly benefit payment.
The last pitfall that I’ll share is retiring with debt – which is something to be avoided, especially credit card or other high interest rate debt. Depending on the interest rate and payment terms, it may make sense to retire with mortgage debt, but be sure to have a plan to pay it off early, if necessary.
Al Waller: I’d like to explicitly state for our listeners one final nugget of wisdom that’s implicit in everything you have shared … Before you take the leap, do everything you can to ensure you are financially ready to retire. If you are not ready and you are able to work, then don’t retire. Continue working and hold off on retiring until you are ready.
Catherine, where can our listeners find your survey report, Life in Retirement: Pre-Retiree Expectations and Retiree Realities?
Catherine Collinson: Please visit transamericainstitute.org.
Al Waller: Thanks, Catherine, to you and your team for your research and insights. Listeners, we hope you’ll join us for the other episodes in this three-part series on pre-retiree expectations versus retiree realities and learning from the experience of retirees.
For our listeners, if you have ideas for future episodes, comments, or feedback, please email me or Catherine at [email protected]. Don’t forget to subscribe to our podcast so you don’t miss upcoming episodes.
Until the next time, I’m your host Al Waller. Stay safe, be well, and thanks for listening.
ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s website and mobile app, wherever you get your podcasts, and at transamericainstitute.org/podcast.
ClearPath – Your Roadmap to Health & Wealth is produced by the Transamerica Institute with assistance from WYPR.
The information provided here is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance.
