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How early retirees and retirees see the future

When thinking about retirement, it all comes down to finances. After all, there is a particular lifestyle that people have become accustomed to. A great deal of emotional and financial planning goes into retirement.

Most of the baby boomers are already there. So what is retirement like for them? And the group of Generation X? They are planning retirement. How are your finances and what do you need to do?

How retirement has traditionally been financed

Many financial advisors previously recommended the three-legged stool approach when planning for retirement: Social Security, pensions, and personal savings. Since then, pensions have been replaced by 401(k) plans and individual retirement accounts (IRAs).

But the basic theory about how to finance retirement remains intact. The only question mark on the minds of many early retirees is Social Security. Will Social Security be available in the next 10 years when these early retirees need it? Will it support the traditional three legged stool?

Who depends on Social Security?

In 2022, more than 47 million Americans will receive Social Security retirement benefits. This boils down to $80 billion in benefits. It is an important source of income for many retired Americans. But for many, it is not the only source of income.

For 37 percent of retired men and 42 percent of retired women, more than half of their income comes from Social Security. The rest comes from retirement funds, savings, or work.

But even though they have other sources, Social Security is an important part of their livelihood.

Others are even more dependent on Social Security. For example, 12 percent of men and 15 percent of women rely on Social Security for 90 percent or more of their income.

Today’s early retirees and retirees have challenges ahead when it comes to financial security. But who are these retirees and what are they doing to prepare?

Generation X: today’s early retirees

This cohort, born between 1965 and 1985, is in his forties and fifties and thinking about retirement. This is a resilient generation. They were locked kids and outlived MTV. They are also surviving parents and children.

Generation X is often referred to as the “sandwich generation” because they fall between baby boomers and millennials. And as a result, Gen Xers often find themselves caring for older parents as well as children.

With high debt and ongoing expenses, planning for retirement is a source of anxiety for many Gen Xers. Fifty-nine percent of Gen Xers were concerned that they would not be able to have a financially secure retirement, according to a survey by the National Retirement Security Institute.

Generation X is a financially savvy group, according to a survey by Investopedia. Almost 80 percent of these early retirees have an intermediate or advanced understanding of finances. And they expect Social Security and 401(k) plans to be their main sources of retirement income.

But with adult children moving home, parents moving, high inflation and stock market volatility, these early retirees seem a bit more pessimistic than current retirees.

Most retired baby boomers are comfortable

Born between 1946 and 1964, baby boomers dominated the workforce for decades. But as they have aged, they now dominate retirement. Many baby boomers have enjoyed retirement for several years.

Today’s retirees are optimistic. While 64 percent of early retirees are worried about stock market volatility, only about 49 percent of current retirees are worried, according to a Kiplinger survey.

About 70 percent in the survey said they expect to live comfortably on their income. Sixty-six percent said they would not run out of money.

But in the same survey, less than 55 percent of early retirees thought they wouldn’t run out of money.

Some of the discrepancy could be due to planning, but retirement age is also a factor.

Retirement age is a factor

The retirement age is increasing. Americans stay in the workforce longer. In 1992, for example, the average retirement age for men was 62 years; in 2021, he was 65 years old. The retirement age for women has also increased. Fifty-nine years old was the median age in 1992 for women, but it increased to 62 in 2021. COVID-19 slightly interrupted the trend in 2021. Workers took the opportunity to retire a little earlier to avoid closure.

Despite the COVID-19 disruption, Americans are working longer, and it’s partly due to financial concerns.

The average monthly Social Security retirement check is $1,672.76. That doesn’t go far when you consider that the average monthly mortgage in the United States is $1,100. So there isn’t much left for living expenses, let alone the niceties of life.

Americans are working longer to continue paying into 401(k) plans and saving more money. Many start collecting benefits but continue to work. They must supplement your Social Security benefits.

Social Security and Viability of Medicare

However, early retirees and retirees have one thing in common, and that is their concern about the viability of Social Security and Medicare.

In a Kiplinger survey, 79 percent of early retirees were concerned about the financial strength of Social Security, while 69 percent of retirees were concerned.

Medicare did not fare much better, with 68 percent of early retirees doubting its financial strength and 62 percent of retirees doubting it.

Financial Plan for Early Retirees and Retirees

Social Security is just a leg on the stool. Those who feel more optimistic about retirement have 401(k) plans and savings. But sometimes that plan doesn’t work, causing people to work longer.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are intended for general informational purposes only and should not be construed as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or other personal finance advice. The Epoch Times is not responsible for the accuracy or timeliness of the information provided.

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