Are retirees living comfortably? Believe it or not, for the last five years, roughly 80% of all retirees say they are, if you trust the results from the 32nd Annual Retirement Confidence Survey conducted in January of 2022 by the Employee Benefit Research Institute (EBRI) and Greenwald Research.
While the level of confidence among retirees has remained relatively steady, those who have yet to retire have seen their confidence in future retirement grow. This latest survey shows a whopping 73% of workers are confident they’ll have enough money to live comfortably in retirement.
But, while interesting, these survey results leave one glaring question: What exactly does it mean to “live comfortably in retirement”?
That’s a question that’s less objective than it’s made out to be.
When you think about retirement, what do you think of?
Chances are, it’s an unrealistic cliché you’ve seen in too many financial service company commercials.
“A lot of people think retirement will be moving to the beach and living the good life,” says Ari Shpanya, Co-Founder & CEO at LoanBase in San Francisco. “In reality, much of America hasn’t saved enough. Many are forced to return back to work after retirement especially with rising prices.”
Reality can be a cold slap in the face. Indeed, according to the EBRI survey, greater than one in four (27%) retirees have gone back to work. This doesn’t appear as it seems, however. Three out of four (78%) retirees say working for pay is not a source of income in retirement. That means at least some portion of employed retirees are working for a reason other than retirement income.
So, are they living a comfortable retirement?
It’s hard to say.
“In the real world of retirement, retirees have defined ‘comfortable’ in a variety of ways,” says Tom Kelly, CTO at Life Part 2. “Some retirees have defined it as having enough money to cover all of their expenses, while others have defined it as being able to do the things they love. Still others have defined it as a combination of both.”
Most people usually focus on a financial metric when it comes to defining a comfortable retirement. The 2022 Retirement Confidence Survey reports that 73% of the retirees surveyed cite “having money in savings, prepared well, and good investments” as the reason they feel confident about their ability to live comfortably throughout retirement.
What does that money do for them that makes them live comfortably?
The answer may seem obvious.
“Retirees have defined ‘comfortable’ as having enough money to meet 100% of their needs,” says Dawn Dahlby, Founder and President at Releve Financial Group in Minneapolis. “These needs include living in an ideal home, enjoying healthy food, spending time with their family and friends, being connected to a community and enjoying the activities that inspire them. Retirees want the balance of exploring, relaxing and being connected with others.”
Having the financial resources does more than provide material goods or plane tickets to exotic destinations. It acts as a cushion against uncertainty.
“Retirees know they are comfortable when they feel prepared for the unexpected and they have concluded there is enough income and security net that they can sleep at night, or they can spend on the things they want guilt free,” says Marc Scudillo, Managing Officer at EisnerAmper Wealth Management & Corporate Benefits, LLC in Iselin, New Jersey.
How does the current market volatility and inflation impact your ability to live comfortably in retirement?
For example, 36% of current retirees report that their overall expenses/spending is higher than last year. Why might increased expenses or falling retirement savings be a concern?
“Most retirees have the primary goal to never run out of money,” says Zachary A. Bachner, an Advisor at Summit Financial Consulting in Sterling Heights, Michigan. “As long as they have savings, they may consider their life to be comfortable. True comfort comes from not having to worry about your finances, but this level of comfort would require more than just the minimum amount of savings. Sleeping peacefully at night despite the stock markets moves is what true comfort looks like.”
And what might that dollar amount of savings be?
Therein lies the real problem of defining a comfortable retirement.
“Some may consider a comfortable retirement to be living with their family and spending time with grandchildren while others may view it as a beachfront property and traveling around the world,” says Eric Thompson, Director and Wealth Advisor at Round Table Wealth Management in Westfield, New Jersey. “The definition of ‘comfort’ varies from person to person, but in general, it allows each individual to live a life with ease and comfort without worrying about what might come next.”
This may suffice as a generic operational definition—to “live a life with ease and comfort without worrying about what might come next”—but it’s up to you to fill in the blanks.
Everyone has unique goals, individual desires, and different expectations. Those variables and more must be entered into your own personal formula when it comes to defining what a comfortable retirement means.
