78% of People Aren’t Ready for Retirement, but There’s Good News

by Barbara Hadden

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Editor's Note: This story originally appeared on NewRetirement.

A recent study, the 2022 Schroders US Retirement Survey, reports that a mere 22% of people approaching retirement age believe that they’ll have enough money to maintain a comfortable standard of living, down from 26% a year ago.

Only 1 out of every 5 are prepared for retirement. Most people believe they haven’t saved enough, especially with potentially worsening economic conditions.

If you are concerned about your financial prospects, don’t worry. You’ve got this. Here’s how to improve your financial outlook.

The 1 Simple Step to Improve Your Financial Outlook

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Let’s start with the good news. It sounds simple, but building and maintaining a holistic financial plan has been proven to be an effective catalyst to a better financial outlook.

The Schroders survey found that among those who have done retirement planning, a full 91% say it has been useful to them, with 33% reporting it has been critical to putting them on a better path for retirement.

Other surveys report similar data. For example, Charles Schwab finds that people with written plans feel more confidence and less stress. Furthermore, research finds that people with plans make better decisions, develop better financial habits, and have better financial outcomes.

So, Why Don’t More People Plan?

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Among Schroders’ respondents without a plan, 76% find the idea of planning overwhelming and 56% believe it doesn’t make sense because life is so uncertain.

Are they right?

Overwhelming: Yes, planning can be overwhelming, especially if you are not comfortable with personal finance. However, new online tools like the NewRetirement Planner aim to make it easy to build a plan step by step.

Uncertainty: Yes, there is a lot you can’t predict. However, that is why you have back up and contingency plans. And, you can develop conservative strategies for ensuring that your money lasts as long as you do.

Planning means that you set goals and that you know how to deal with things when they don’t go as you think they should.

“Given the relatively small percentage of Americans who have taken the time to create a specific plan for generating enough assets for retirement, it’s not surprising to see that many believe a dream retirement is out of reach,” said Joel Schiffman, head of intermediary distribution for North America at Schroders.

The economic uncertainty we face as we emerge from the pandemic has people stressed about their financial outlook.

65% Are Worried About Inflation Lessening the Value of Assets

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Yes, inflation is a valid concern.

However, the run-up in prices is unlikely to last a long time and the effects can be largely mitigated. In fact, a recent survey of NewRetirement subscribers (people who are maintaining a holistic financial plan) found that:

  • 48% had enough cushion into their budget to be able to largely ignore inflation.
  • 42% are reducing their discretionary spending.

53% Have Concerns About a Major Market Downturn Shrinking Assets

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Yes. We are actually in the midst of a market downturn.

Stocks are bouncing around lows last seen a year ago. But, gains remain well above the dips we saw in March 2020 at the start of the pandemic.

It is highly likely that we will regain recent losses.

And, there is a lot you can do to mitigate losses. Explore “What to Do When Your Investments Go Down?”

49% Have Anxiety About Health Costs Draining Savings

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According to Fidelity Investments’ Retiree Health Care Cost Estimate report, a 65-year-old couple retiring in 2022 can anticipate spending $315,000 in health and medical expenses throughout their retirement.

That is more than a lot of people have saved. And, it doesn’t include the possibility of needing to fund a long-term care need.

Use the NewRetirement Planner to get a personalized estimate of your projected health care expenses and to explore how to fund long-term care (you have lots of options besides insurance). Then explore “12 Surprising Ways to Save on Retirement Health Care Costs.”

49% Believe That They Will Be Unable to Afford Their Desired Lifestyle

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When it comes to finances, it is easy to focus on savings balances, inflation, and investment returns. And, while you have some degree of control over those things (especially if you have a plan), much is indeed out of your hands.

What do you control? You know what you want out of your life. And, it is important that you continue to focus on what you want — prioritize and compromise to live the life you want.

And, it doesn’t actually matter how much savings and investments you have. There are other financial levers at your disposal that will enable you to achieve your goals.

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