At the same time attitudes toward retirement are shifting, Social Security, inflation and market volatility continue to challenge many Americans as they squint at an uncertain future. More than half (55%) of Americans are considering working during their retirement, according to Franklin Templeton’s 2015 Retirement Income Strategies and Expectations (RISE) survey. Nearly one-third (30%) of survey respondents ages 18 to 24 say they never plan to retire.
People’s expectations for retirement lifestyle are evolving, and many of the survey participants have accepted the idea of delaying retirement and continuing to work, some out of necessity and some by choice.
The majority (61%) of survey respondents say that if inadequate income in retirement makes it impossible for them to retire as they had planned, they have adjusted their plans or will do so, in order to delay retirement. The youngest respondents to the survey, those ages 18 to 24, are likeliest to say they would keep working (74%)
Delaying retirement isn’t always just a matter of money. About 20% of non-retired respondents say they would most likely delay retirement because they enjoy working. However, only 28% of all adults expect working to be a primary source of income in retirement.
Among those who plan to retire, when asked what they look forward to in retirement, slightly more than one-third (36%) say “not working.” Many eagerly anticipate pursuing hobbies (46%) or learning a new skill or subject (22%).
The concept of retirement, with its concerns about savings and investments, still causes some stress: 67% of Americans experience some level of stress. Stress levels peak within 15 years of retirement, with 76% reporting stress, according to Franklin Templeton’s data.
Topping the list of retirement concerns: running out of money (27%) and health/medical issues (27%). Survey respondents ages 25 to 34 years are most worried about running out of money (36%), while older respondents ages 65 to 74 years are most concerned about health and medical issues (52%).
Respondents also seem to be stressed when they lack understanding of their income needs in retirement or fail to plan for retirement. Those who do not understand their retirement income plan are significantly likelier to feel stress and anxiety (86%) than those who do understand their plan (66%). Another driver of stress: nearly 40% of pre-retirees are not saving for retirement.
Social Security appears to be a significant driver of confusion, and several factors are to blame:
- 39% do not know with a high degree of confidence the amount of current income Social Security will replace;
- 22% of pre-retirees don't know when to start taking the benefit; and
- 37% are not confident that Social Security will provide expected income in retirement.
Although delaying the age at which an individual begins receiving Social Security may result in higher benefits and increased retirement income, the majority (59%) of retirees say they took the benefit before full retirement age. Only 16% started the benefit at full retirement age, and a mere 7% of retired Americans delayed until after full retirement age.
The lack of understanding is also apparent when examining Americans’ reasons for choosing to initiate their Social Security benefit. About two in five (42%) of those who began (or expect to begin) taking Social Security before full retirement age made the decision simply on the basis of eligibility, the survey found. Only about one in five (21%) say the primary reason for taking the benefit early is needing or expecting that they will need the money.
Americans are reasonably good at estimating their expenses at retirement, but they tend to underestimate the impact of inflation later in retirement, Franklin Templeton found. Typically, people expect their retirement expenses to remain flat throughout retirement. Unfortunately, the survey points out, inflation can cause a sharp increase in expenses over even a 10- to 15-year period. For many, retirement may span a much longer time, approaching 30 to 40 years.
When it comes to actual spending in retirement, the survey found that as retirement progresses, retirees report spending more than they did pre-retirement:
- 28% report a spending increase one to five years into retirement;
- 42% report an increase six to ten years in;
- 44% spend more 11 or more years into retirement; and
- 37% of all retired respondents report an increase in spending over pre-retirement levels.
More than one-third (36%) of non-retired respondents expect to live on an amount less than 70% of their current income, the survey found. This may sound optimistic to some, but close to half of retired respondents report (45%) that they live on less than 70% of their pre-retirement income.
Overall, a majority of survey respondents who plan to retire (93%) say they are looking forward to their retirement.
“Conventional thinking and attitudes about what it means to retire are changing,” says Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments. He cites a range of ways individual investors can lessen retirement anxiety, including beginning to save and working with a financial adviser to develop a written plan.
Taking the steps to understand what income sources will be in retirement and how to match them with a realistic estimation of future expenses can help take some of the mystery and worry out of thinking about retirement, Doshier says.
The Franklin Templeton Retirement Income Strategies and Expectations (RISE) survey was conducted online between January 8 and January 22 among a sample of 2,002 adults (1,001 men and 1,001 women), 18 years of age or older.