The Expectation vs. Reality of Saving for Retirement

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By Macro Analyst Desk

When it comes to saving for retirement, the gap between expectation and reality can be startling. Many of us have been fed a steady diet of myths and half-truths that skew our understanding of what it really takes to retire comfortably. Some believe that their savings will last as long as they do, while others are under the illusion that Social Security will cover all their expenses. The truth, as is often the case, lies somewhere in between.

“The biggest myth around retirement savings is that everyone needs over a million dollars saved in order to retire, and if you’re not close to that number, retirement will be impossible. The reality is, it’s all relative,” says Michael A. Scarpati, CEO of RetireUS. “Some people live frugally and can retire solely on Social Security and Medicare, others require millions in the bank to maintain their lifestyle, and then there’s everything in between.”

This notion that there’s a one-size-fits-all solution to retirement is not only misleading but can also be detrimental to those trying to plan their futures. According to a report by the Employee Benefit Research Institute, only about 20% of Americans are very confident that they will have enough money to live comfortably throughout their retirement years. This statistic highlights a broader issue: many people simply don’t know what they need for retirement, and as a result, they may not be saving enough or investing wisely.

For years, the conventional wisdom has been that you need to save a certain percentage of your income—typically 10% to 15%—throughout your working life to retire comfortably. But the truth is, the amount you need to save depends on a variety of factors, including your lifestyle, health, and retirement goals. What works for one person may be completely inadequate for another.

Michael Scarpati emphasizes the importance of understanding your personal retirement needs rather than relying on generic advice. “The issue that most people have is that they actually don’t know what they will need to safely retire, and as a result, they are not putting their best foot forward to make it a reality,” he says. “Every day that goes by without knowing your retirement needs is a missed opportunity to make your money work properly toward your vision for the future. I encourage everyone to take just 15-20 minutes to do this math and clarify their future needs.”

But how do you figure out what your retirement needs really are? The first step is to dispel the myths that have taken root in popular culture. For example, the belief that Social Security will cover all your expenses in retirement is a dangerous misconception. According to the Social Security Administration, Social Security benefits are only designed to replace about 40% of the average worker’s pre-retirement income. If you’re planning on Social Security as your sole source of income, you may be setting yourself up for a rude awakening.

Another common myth is the idea that once you retire, your spending will automatically decrease. While it’s true that some expenses, like commuting and work-related costs, may go down, others, such as healthcare, can skyrocket. A study by Fidelity Investments estimates that the average 65-year-old couple will need approximately $300,000 to cover healthcare costs in retirement—a figure that doesn’t even include long-term care.

Given these realities, it’s clear that a more nuanced approach to retirement planning is necessary. It’s not enough to follow general rules of thumb or rely on broad averages. Instead, you need to take a hard look at your personal situation, consider your future needs, and plan accordingly. This means thinking critically about your expected lifestyle, potential healthcare costs, and other factors that will impact your retirement.

The key takeaway? Don’t fall into the trap of believing that retirement planning is a one-size-fits-all endeavor. Whether you’re just starting out or nearing retirement age, it’s crucial to understand that your financial needs are unique to you. By taking the time to clarify your retirement goals and dispel the myths surrounding retirement savings, you can set yourself up for a more secure and fulfilling future.

Michael A. Scarpati and the team at RetireUS specialize in helping individuals navigate the complexities of retirement planning. Their approach is tailored to each client’s unique situation, ensuring that you’re not just following generic advice but crafting a strategy that aligns with your specific needs and goals. Whether you need help determining how much to save or want to explore investment options that fit your risk tolerance, they offer the expertise and guidance to help you make informed decisions.

In conclusion, the road to retirement is paved with good intentions, but without a clear plan, those intentions can easily lead you astray. Understanding the reality of your financial situation and taking proactive steps to address your retirement needs is the best way to ensure that you’re not only prepared but confident as you approach this next chapter of life.

Photo by Alexander Grey

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