Photo credit: www.kiplinger.com
In the latest insights from the Retirement Confidence Survey, a study annually conducted by the Employee Benefit Research Institute (EBRI), the organization has investigated spending behaviors among retirees through its 2024 Spending in Retirement Survey.
To gain perspective on the study’s findings, I had a conversation with Bridget Bearden, a research strategist at EBRI and one of the report’s authors.
Your survey uncovered several ‘concerning trends.’ What were they?
The survey gauged how well retirees’ current realities matched their pre-retirement expectations, as well as their overall satisfaction with life after retirement. The results revealed a significant decline in satisfaction levels compared to the findings from 2020 and 2022.
In addition, 31% of retirees indicated their current spending exceeded their financial means in 2024, a sharp increase from 17% in 2020 and 27% in 2022.
What is behind the trends?
According to the study, three primary factors have influenced these trends:
- Lack of adequate savings
- Inflationary pressures
- Increasing credit card debt
Half of the respondents acknowledged that they had saved insufficiently for retirement. In an open-ended query regarding their satisfaction, many retirees cited inflation as a significant issue affecting their quality of life. Common responses included assertions like, “Inflation is impacting my lifestyle negatively,” highlighting the struggle for some to sustain their desired activities due to rising costs.
So people have taken on more credit card debt?
Among retirees, 63% reported having some form of outstanding debt, with 68% of those holding credit card debt. This represents a notable increase from 43% in 2020 and 40% in 2022. However, it is worth noting that only 10% characterized their overall debt as unmanageable or excessively burdensome.
You also asked about emergency savings
The survey indicated that 59% of retirees maintain at least three months of emergency savings, a decrease from 69% in the previous year. Furthermore, 36% reported that they faced unexpected expenses after retiring, often due to unanticipated rises in housing or healthcare costs, with additional burdens stemming from financial support needed by children or grandchildren.
But home equity has risen significantly
Retirees reported a median increase of 47% in their real estate equity since retiring, a statistic that echoes the overall rise in home values over the past seven years. Despite this increase in home equity, it has not led to a greater willingness to take risks with their investment portfolios.
What are their main sources of income?
The retirees surveyed were aged between 62 and 75, with 83% indicating they receive income from Social Security. A further 39% benefit from guaranteed income streams through workplace pensions or annuities, particularly among those in the public sector. Meanwhile, 20% reported income generated from individual retirement accounts (IRAs), which are more common among private-sector retirees.
Are there bright spots in the study?
Interestingly, retirees who expressed a more favorable outlook regarding their expenses and general well-being cited several contributing factors, including:
- Longer tenure with their employers
- A stable number of employers throughout their careers
- Extended participation in retirement plans
- Availability of guaranteed income sources during retirement
How about non-financial factors?
Health, independence, social connections, and a sense of preparedness emerged as significant factors influencing satisfaction in retirement. Additionally, married individuals generally reported higher levels of social interaction and improved financial circumstances.
Note: This article originally appeared in Kiplinger Personal Finance Magazine, recognized for its reliable advice and guidance. Discover more insights here.
Source
www.kiplinger.com