Are baby boomers aged 60 to 65 living in dreamland about what it takes to retire?
Advisors might think so if they read the results in the recently released Schroders 2022 U.S. Retirement survey.
The report found that more than half (55%) of Americans surveyed and nearing retirement — people between 60 and 65 years old — don’t believe they’ll be able to replace 75% of their last paycheck in retirement income. And surprisingly, the vast majority don’t believe they will have to: Less than one-quarter (23%) said they needed to replace 75% of their final paycheck to live comfortably. Respondents (27%) were more likely to say that they will need to replace less than 50% of their final paycheck.
Almost one-quarter (23%) of that group have no idea how much monthly income they will need to generate in retirement to live comfortably, and most are concerned (53%) or terrified (33%) by the idea of no more regular employment paychecks.
Only 11% of 60- to 65-year-olds said they will take their Social Security benefits at age 70. Waiting until 70 to claim benefits doesn’t make financial sense for everyone. Still, if one does wait, the yearly benefit will be much higher than if they started collecting at full retirement age.
Not just boomers
But it wasn’t just boomers nearing retirement who aren’t planning to wait until age 70.
The survey found that 86% of non-retired Americans 45 and older are aware they could receive higher Social Security payments by delaying the start of their benefits, yet just 11% of respondents plan to wait until age 70. Close to half (48%) of non-retired Americans surveyed plan to begin taking Social Security between the ages of 62-65.
Joel Schiffman, Schroders’ Head of Strategic Partnerships, said in a press release that last year’s survey found only 10% planned to wait until age 70 to take higher benefits, validating this year’s results.
“Given increasing life expectancies and widespread concerns about not being able to live comfortably without a paycheck, the advantages of creating a retirement income strategy that maximizes your Social Security benefits can’t be overstated,” he said.
Among those already retired, about half (49%) surveyed said they don’t have any strategies to generate retirement income and instead withdraw money as needed.
Of those retirees who do have income strategies, the three most popular approaches are systematic withdrawals from retirement accounts such as IRAs and 401(k) plans (29%), dividend-producing stocks or mutual funds (18%), and annuities (15%).
8 Acre Perspective conducted the survey among 1,000 U.S. investors nationwide ages 45 to 75 from February 17 through February 28, 2022. The median household income for working Americans surveyed was $75,000. The survey included 317 respondents with employer-provided defined contribution retirement plans.