WARNING: Near Record Confidence Among America’s Retirees

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Confidence among workers about retirement is nearing record highs, with 72% confident they will be able to retire comfortably. That’s close to the record set in 1993 when 74% of the workforce was confident in retirement. Anne Tergesen writes in The Wall Street Journal:

About three-quarters of U.S. workers and retirees believe they will have enough money for retirement, an increase from a year ago, according to a survey released Thursday.

The survey from the Employee Benefit Research Institute provides a snapshot of how Americans feel about their retirement prospects.

Among workers, 72% are somewhat or very confident in their ability to live comfortably in retirement, up from 63% last March and 69% in January 2020. Today’s level is close to the survey’s record of 74% in 1993, three years after the survey began.

But if you’re a 65-year-old man, there’s a 50% chance your retirement will last 22 years, and a 25% chance it will last 28 years. If you’re a 65-year-old woman, there’s a 50% chance your retirement will last 24 years, and a 25% chance it will last 30 years.

What happened to those workers who were confident in retirement in 1993? If you were a man retiring in 1993, eight years into your retirement you were hit by the dot-com crash. Fifteen years in, you were hammered by the financial crisis. If you were one of the 25% who made it 28 years into retirement, you were rewarded by the COVID crash. The keyword in your retirement has been volatility, not confidence.

Now, despite the risks posed by not saving enough for retirement, Bloomberg’s Alexandre Tanzi reports that Americans are in a “rush to retire” after COVID-19. He writes:

After a year of early-morning Zoom calls, the specter of a deadly virus and soaring stock and real estate values, working American baby boomers who can afford it plan to get out while the getting’s good.

About 2.7 million Americans age 55 or older are contemplating retirement years earlier than they’d imagined because of the pandemic, government data show. They’re more likely to be White, a group that typically has a larger amount of accumulated wealth, and many cite robust retirement accounts and Covid-19 fatigue for their early exit, according to interviews with wealth managers and federal surveys.

Much like the U.S. economy’s so-called K-shaped recovery, the pandemic is treating the affluent differently, empowering them to leave corporate life early. Others who lost jobs had to delay retirement, or grew discouraged and retired before they were ready.

Early retirements, whether desired or forced, will deprive the labor market of some of its most productive workers and have an impact on the economic recovery that is still too early to evaluate. Federal Reserve Chairman Jerome Powell this week cited a “significant number” of people saying they’ve retired as one reason companies are reporting labor shortages, although it’s unclear if they’ll eventually rejoin the job market.

The most productive employees and business owners in America are leaving the workforce in their prime earning years to bet on a market that has collapsed three times in the last twenty years because “life is short?” Is that prudent financial management?

If you are a regular reader of YourSurvivalGuy.com, you know that it pays to save until it hurts. And working even part-time in your retirement years can make a big difference.

Action Line: If you are considering retiring early because “life is short,” take a look at the numbers above and imagine how long your retirement could be. If you retire now and live until you’re 93, it will be your retirement that seemed short because you’ll be right back at work in a few years after your savings are spent. If you are unsure, find an advisor who can help you make those decisions. I would love to talk to you.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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