Retirement snapshot: 3 things to know about the average pre-retiree

Yes, every candidate for retirement is different.

But, whether you’re an individual beginning to eye retirement or a financial planner with a constant eye on helping your clients successfully retire, a snapshot of the typical would-be retiree can provide perspective worth considering.

The 25th annual Transamerica Retirement Survey, a compilation of data featuring the responses of more than 6,000 U.S. workers, sums up the hopes and fears of those nearing retirement.

Retirement is still revered, but…

Concerns about being in position to enjoy retirement are rampant – nearly 70% of respondents indicated some level of agreement with the statement “I could work until retirement and still not save enough to meet my needs.”

However, when asked what words they associate with retirement, 87% selected at least one positive word; just 39% selected at least one negative word. “Freedom” was cited by a survey-high 58%, as all six positive words received more responses than any of the five negative words.

“Financial insecurity” paced the negative words selected (17%).

Asked about their dreams for retirement, respondents chose “traveling” (65%) the most, followed by “spending more time with family and friends” at 57%, and “pursuing hobbies” at 49%.

The definition of ‘retirement’ is changing

Another retirement dream that might surprise you? Nearly one-third (32%) said they dream of doing some form of work in retirement.

Thirty-nine percent of respondents said they expect to retire at age 70-plus or not at all. More than half (52%) plan to work at least part time in retirement.

Why? Well, 80% cited at least one financial reason for working past age 65, and 71% also cited at least one healthy aging reason, such as remaining active or keeping their brain alert.

The word “retirement” isn’t going anywhere, but the term “financial independence” may more accurately define what the average person dreams about when they think about their golden years.

Retirement funding skews toward self-reliance

Nearly half of workers (48%) expect self-funded savings to be their primary source of retirement income, with three-quarters of those relying first and foremost on 401(k)s, IRAs, and similar vehicles as opposed to nonretirement accounts.

More than one-third (34%) said they had taken a loan or early/hardship withdrawal from a 401(k) or similar account, a big impediment to adequately growing savings for retirement.

Social Security (23%) came in second in terms of as a primary source for retirement funding, but it comes with plenty of reservations: 72% agree with the statement, “I am concerned that when I am ready to retire, Social Security will not be there for me.”

Pre-retirees seeking reassurance might be wise to listen to those who came before them, as recent research suggests that pre-retirement fears often prove unfounded.

AICPA & CIMA resources

• Tax and Financial Planning Tips:  Retirement (exclusive to Personal Financial Planning Section and Tax Section members)
• The Roth Conversion Decision Chart (exclusive to PFP Section members)

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.