Dale Hall headshot
R. Dale Hall, FSA, CERA, MAAA, CFA
Dale Hall headshot
R. Dale Hall, FSA, CERA, MAAA, CFA

There aren’t many milestones as popular and exciting as retirement. Being able to dedicate oneself to hobbies and passions, having more time with friends and family, embarking on dream vacations, the freedom to slow down and smell the roses — retirement means different things to different people, but the desire to one day retire from the working world is nearly universal. Whether you’re still working or already retired, a secure retirement depends on careful planning and saving.

In a 2019 study by the Aegon Center for Longevity, 49% of Americans cited running out of money as their chief retirement worry, and this fear was deepened even further by the COVID-19 pandemic. Roughly 37% of pre-retirees and 23% of retirees plan on making some significant changes in their lives in response to the pandemic’s economic effects, according to the Society of Actuaries Research Institute’s Retirement Risk Survey Brief Report. Some of those changes include working longer instead of retiring, returning to work, changing their lifestyle or reconsidering living and care arrangements for family members. Despite challenges and unforeseen risks, Americans can take steps to make their retirement dreams a reality.

Never too early or too late to save

The following considerations are important when forming a strategy to achieve retirement security:

  • People with a low level of assets should weigh their options about when to retire. Waiting until 70, for example, would maximize monthly Social Security income.
  • Many retire early involuntarily or feel they were pushed into retirement. Planning ahead is vital for these potential likelihoods.
  • It’s important to make sure funds are adequate to cover emergencies and other unplanned expenses.
  • Paying off or at least paying down mortgages and consumer debt contributes significantly to a secure retirement.
  • Many plan on working full-time or part-time during retirement to stretch funds.
  • It’s crucial to consider how inflation and longevity can affect retirement savings.

Individuals may be able to take additional steps depending on how close or far they are to retirement. For example, it’s not too early to think concretely about retirement even if it’s 25 years or more away. Now is the time to create a spending plan and an emergency fund, as well as pay off debt. All of which will make it more possible to save for retirement and invest for the long haul.

Those who are 10 to 25 years away from retiring can run a retirement projection and estimate life expectancy to calculate the necessary funds. They can then adjust their investment income and manage risk with insurance protection to help ensure retirement security.

Retirees and people nearing retirement can increase financial security by developing a spending plan and evaluating their income sources. For instance, they can work with a financial planner to create a distribution strategy. They also should plan for the rest of their lives, including later in life when they may need more help. To preserve their estate, long-term care insurance should be a consideration.

Plan for the unexpected

Like everything in life, retirement comes with risks. Retirees can take measures to lighten the effects of these risks, however. Living a more economical lifestyle, earning additional income and making prudent financial decisions are just a few ways to lessen strain on retirement funds. And living a healthier lifestyle enhances the quality of retired life while also potentially eliminating or postponing the need for expensive medical and long-term care.

Although living as long and healthfully a life as possible is something many older adults dream of, it can be difficult to understand how much one should save if living decades after retirement is a feasible possibility. For those who are still years away from retirement, planning tools such as calculators can estimate how much they need to save based on their predicted longevity.

The SOA’s Retirement Planning Tools guide explains the differences between simple, intermediate and advanced calculators and what they can and can’t do when calculating retirement savings. One of these calculators is the Longevity Illustrator, which estimates how likely it is for an individual to live to 90, 85, 80 and so on. It is important to have multiple ages in mind to prepare for the different likelihoods. Seeing the probability of living to 90 — or even 100 — might help savers realize their retirement could last for decades. By preparing accordingly, they vastly improve their chances of achieving a secure retirement.

R. Dale Hall, FSA, CERA, MAAA, CFA, is managing director of the SOA Research Institute.

The opinions expressed in each McKnight’s Senior Living guest column are those of the author and are not necessarily those of McKnight’s Senior Living.

Have a column idea? See our submission guidelines here.