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Retirement Planning Challenges

June 18, 2019

In 1985, only 10 percent of people aged 65 and older were either in the workforce or job hunting. Today, that share has doubled, for a couple of reasons. First, fewer 65-year-olds have enough money to retire. Second, the number of people in this demographic with a college degree has more than doubled (53 percent today vs. 25 percent in 1985).1

However, while college graduates are more likely to continue working after age 65, it’s those with less education and income who often need to work longer because they generally aren’t as financially prepared.2

Unfortunately, the type of blue-collar jobs often held by those without a college education tend to be more physical. For people with jobs like roofing and contracting, career longevity may be shortened by necessity. Even firefighters and law enforcement officers typically have an earlier retirement path than white-collar professionals.

What you do for a living can be a huge factor in retirement planning. Regardless of your income, it’s important to consider how long you can work. If the nature of your profession behooves an early retirement date, it’s all the more important to develop a strategic retirement income plan. We’re happy to explore insurance and investment options with you — feel free to set up an appointment.

Begin by estimating your retirement income needs as a percentage of your preretirement household income, or your income replacement rate. Often, financial advisors suggest planning to replace about 75 percent of your gross preretirement income to maintain your current lifestyle. That number takes into consideration your decreased living expenses, potentially lower income taxes and no more contributing a portion of your wages toward retirement savings.3

Once you figure out your 75 percent income replacement number, subtract the amount of benefits you’ll get from Social Security. The balance — multiplied by how many years you and your spouse expect to live — is what you’ll need to provide from your own savings and resources. Don’t forget to consider how your household income would drop if one spouse dies, which generally reduces Social Security and any pension benefits.4

The surviving spouse income issue is often overlooked as we tend to have a cheery outlook about couples growing old together. However, around 9 percent of married couples have an age gap of 10 years or more, according to the U.S. Census Bureau. These couples may want to consider staggering their retirement dates. For example, a younger spouse who continues working can maintain employer health coverage until both partners are eligible for Medicare. Plus, the additional household income may help delay filing for Social Security benefits and/or drawing down an investment portfolio. The longer you continue to earn income, the more funds should be available later in retirement.5

One or both spouses also may want to consider working toward a phased retirement. This requires some upfront planning by either working with a current employer, switching to a company offering progressive retirement options, or even pursuing freelance or consulting opportunities.6

Let’s not forget that younger demographics are even more disadvantaged than today’s 65-year-old. The millennial generation is saving less than previous generations did at their age, largely due to cumbersome student loan debt and trouble getting a career off the ground following the last recession. These woes are coupled with fewer jobs offering pensions and the lack of universal employer-sponsored retirement plans.7

While employer-sponsored 401(k) plans tend to offer a contribution match, people who start their own business are all alone in their asset accumulation endeavors. Most entrepreneurs are more focused on getting their business off the ground and, at least early on, don’t make enough money to save for retirement. According to a recent survey by Manta, an online business community, more than one-third of today’s entrepreneurs say they don’t have a retirement plan.8


Content prepared by Kara Stefan Communications.

1 Suzanne Woolley. Bloomberg. April 22, 2019. “America’s Elderly Are Twice as Likely to Work Now Than in 1985.” Accessed May 2, 2019.

2 Ibid.

3 T. Rowe Price. April 2018. “Retirement Perspectives: Income Replacement in Retirement.” Accessed May 2, 2019.

4 Ibid.

5 Eleanor Laise. MSN. May 1, 2019. “5 retirement planning wrinkles for couples with big age gaps.” Accessed May 2, 2019.

6 Sharlyn Lauby. Unretirement Project. Nov. 14, 2018. “5 Retirement Strategies We Need to Start Planning For Now.” Accessed May 2, 2019.

7 Alice Munnell. Politico. June 7, 2018. “Millennials and retirement: How bad is it?” Accessed May 2, 2019.

8 April 28, 2019. “Retirement Planning Options for Small Business Owners.” Accessed May 2, 2019.