Key insights
- A Transamerica study reveals that 62% of Americans fear they won't save enough for retirement, citing economic turbulence, high living costs, AI impacts, and Social Security concerns. Top fears include long-term care needs and outliving savings. This negative sentiment could lead to decreased consumer spending and increased risk aversion in investment decisions, potentially weighing on US equities.
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Most Americans think they could work until retirement and still not have enough saved for their golden years.
In a survey of 10,000 people by the Transamerica Center for Retirement Studies, 62% of Americans said they agreed that they could work until retirement but end up without enough money to meet their needs.
If you're not feeling confident about your retirement nest egg, take stock of your finances now—calculate your shortfall by comparing how much you have saved and how much you'll need. You might need to cut spending to boost your savings for the long run.
“Americans are navigating a turbulent economy, the high cost of living, the impacts of AI and robotics on the future of work, and the nerve-wracking countdown to the depletion of the Social Security trust funds,” said Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies, in a press release. “These megatrends are driving the doldrums in Americans’ retirement outlook.”
According to the survey, top retirement fears include needing long-term care due to declining health, Social Security being eliminated or reduced, and outliving retirement savings.
However, there are ways to mitigate these risks.
If you're worried about future long-term care needs, you can consider purchasing a long-term care insurance policy. However, these policies can be expensive, so it's important to shop around and be strategic when buying a policy. While you'll pay lower premiums when you're younger, buying a policy in your 40s means paying premiums for many decades.
For that reason, David Tenerelli, a certified financial planner at Values Added Financial, advises people to purchase a policy in their early 50s.
"Sometime in your 50s is generally a good time to start getting quotes, since you're less likely to be denied coverage due to chronic health issues compared to those in their 60s and 70s," said Tenerelli in an interview with Investopedia.
As for fears over the future of Social Security, the Social Security Trustees Report predicts that the Old-Age and Survivors Insurance Trust Fund will pay out in full until 2033, after which beneficiaries will receive 77% of their promised benefits.
To plan for that possibility, consider how a 23% cut in benefits would affect your standard of living. You might need to save extra to maintain your standard of living.
To increase your savings, take stock of your options: does your employer offer a 401(k) match? Can you contribute enough to take advantage of it? Are you eligible to open a Roth IRA? If so, how much can you put aside?
Increasing savings often involves reducing spending, so you may need to find areas to cut in your budget, like dining out and subscriptions.
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