Retirement Concerns

“The real purpose of saving is to empower you to keep your priorities – not to make you sacrifice.” – Charley Ellis

BlackRock recently released the results from a survey asking investors about their five biggest retirement concerns. Here they are in order:

1. How do I start saving for retirement?
2. Am I investing properly for retirement?
3. When will I be able to retire?
4. Will I outlive my retirement savings?
5. How will I afford healthcare in retirement?

One of the stats given was that 39% of workers have no idea how to start planning for retirement. Many are stuck and don’t even know how to get started because they become overwhelmed or think they have to know everything ahead of time. It appears the broadest and most basic aspects of retirement planning are the biggest concerns for the majority of people.

There are no specific answers to these questions because everyone has different resources and needs, but there are general guidelines that are useful to every retirement saver.

Tadas Viskanta gave his thoughts on this in a recent piece:

In my book I wrote “savings is the best investment.” If individuals can consistently live below their means and funnel savings into a reasonably diversified portfolio over time there is not that much more they can do. The problem is that investors who get started late make the mistake of trying to make up for lost time by trying to maximize their investment returns. It goes without saying that often leads to unforced errors.

Simply living below your means, saving money on a consistent basis, dollar cost averaging into a broadly diversified portfolio and keeping your behavior under control gets you 80% of the way there. You can make improvements on top of these basic principles, but as far as the main concerns go this is the route the majority of people can easily implement, especially for those with a lack of an understanding in finance.

A few more thoughts on these concerns:

  • Instead of trying to come up with a perfect number or age for retirement, think about how much you’ll need on an annual basis to meet your living expenses. This is much easier to do for someone closer to retirement than younger workers so those just starting out just need to focus on saving as much as they can.
  • The more you save the less income you need to replace in retirement.  This seems obvious but many defer to rules of thumb like the 4% rule or follow the advice that you must replace 80% of your income from retirement funds. These can be useful benchmarks but your sources of income, fixed expenses and future plans must also be accounted for.
  • It’s impossible to plan out your healthcare costs exactly, but remember that most retirees spend less money as they age. This would mean that as healthcare costs are likely to increase your other living expenses should be decreasing. The difference comes down to your particular health and insurance situation.
  • While they are by no means perfect, targetdate funds or robo-advisors are a great option to gain access to a broadly diversified portfolio at a low cost for those just starting out with smaller amounts of money.

There are no easy answers to these concerns. You save money, update your plan along the way as life intervenes and don’t allow short-term worries to upset a long-term process.

Read more advice for novice investors from myself and other financial bloggers here:
Finance blogger wisdom: advice for novice investors (Abnormal Returns)

5 big retirement concerns (Blackrock)
Finance blogger wisdom: Four years and counting (Abnormal Returns)

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What's been said:

Discussions found on the web
  1. My Own Advisor commented on Jul 20

    “The more you save the less income you need to replace in retirement.”

    For sure. I hope a $1 M personal portfolio will yield 4% whereby I don’t need to withdrawn the capital Ben. We’ll see… 🙂

    • Ben commented on Jul 21

      Sounds like you are well on your way from your income updates. Nice to have an idea of the amount of income you’ll need.

  2. John Thees commented on Jul 20

    The answers to the five concerns are simply (not easy), but because there is no financial education in high schools or colleges and universities, most folks simply have no idea what to do – they think that saving and investing for retirement is difficult and, having no real knowledge about it, either don’t do anything or turn things over to a “financial advisor” who most likely wants to sell them high cost stuff they don’t necessarily need. It’s really sad that folks in general are ignorant about this and end up with way too little retirement money when they are forced to quit working because of age and its associated health problems. Early financial/investing education is the answer.

    • Ben commented on Jul 21

      I agree. Some say financial literacy doesn’t work but I just think the studies they have done aren’t doing it right. Just learning the basics would help many people out there that don’t know what they’re doing. You can’t save everyone from themselves, but many would benefit from increased financial ed.

  3. Robb Engen commented on Jul 20

    There are legitimate concerns for folks who are hoping to retire within five years and have largely ignored their retirement savings, outside of (hopefully) a paid-off home.

    Sadly, instead of reading sensible articles about how to start planning for retirement, we’re treated to stories of this 64-year-old couple worth $2.5M wondering if they’ll be able to retire next year –

    • Ben commented on Jul 21

      Wow, crazy story. All depends on perspective I guess. Lifestyle and figuring out what matters to your situation are important for all different sized net worth people.