“Mirror, mirror on the wall… will I retire after all?”
The very word “retirement” evokes emotion. It can make you happy or make you want to hide. It depends on what you think your golden years will hold. Apparently, the majority of Americans solve the problem by not thinking about retirement at all.
“Why do so many people save little – or nothing at all – for retirement?” asked Forbes Magazine author Larry Light in a 2016 article titled “The Real Reason People Don’t Save For Retirement.” “The future isn’t real to them,” he says. “Only today matters. Psychological research bears out this sorry news, which is ingrained in human nature.”
Light refers to a survey by the Pew Charitable Trust: only half of American workers are enrolled in a workplace-sponsored retirement plan. And of those, most save only a few percentage points of their pay.
His article stresses both the financial and emotional components, and local experts agree.
“The biggest issue with people being prepared for retirement is not starting early,” says Andy Hampson, Senior Vice President and Trust Division Manager at Home Federal Bank of Tennessee. “A significant portion of Americans are at risk of retiring into poverty. The moment you take that first job, you should always participate at a minimum of 3 percent and not stop there. When you see people who retire and have very small amounts, it’s probably because they didn’t start addressing retirement until their late 30s, 40s or 50s. The key is to get started, and the earlier the better!”
Status: It’s Complicated
“Retirement is an interesting topic,” said the Rev. Diana Brown Taylor, a counselor and ordained deacon in the United Methodist Church. “It’s complicated. It has layers. It depends on the individual and how you navigate change and your emotional state going into it. Those factors are going to be predictors about how you do in retirement.
“My full retirement age is 67,” Brown Taylor said. “People born between 1943 and 1954 will have to work until age 66 to receive their full benefits; between 1954 and 1959, it’s 66 and 10 months. At 1960 it increases to 67.”
Brown Taylor has counseled for 28 years, seeing a wide variety of people moving toward retirement. “Some people have difficulty functioning without structure,” she said. “That seems to be what pulls the rug out from under them. You’ve gone all these years having to get up and dressed, having a commute, having to be there at a particular time. Now that’s gone away. The challenge is, ‘What’s next?’ ‘What do I do now?’
No Longer a Company Man
A lack of company benefits can add to the stress.
“There’s a societal change in the last 20 years where fewer and fewer companies offer traditional pension plans to employees,” says Kelley Headrick, Vice President and Business Development Manager at Home Federal. “Employees now should take advantage of defined contribution plans, such as a 401K plan, offered by their employer where both employee and employer may participate. The employee should take advantage of any employer matching money.”
“We do a great job helping companies set up plans,” Hampson adds. “We conduct thorough, easy to understand employee education meetings, and the key component to success is the employee’s participation in this process.”
“Employee education is so important,” says Trish Turner, Home Federal Vice President and Employee Benefits Administrator. “If a company is offering a retirement plan, the company should offer employee education about the retirement plan. So often, employees aren’t even aware the company is making a matching contribution and therefore are leaving money on the table.”
Everyone Must Play and Plan
“If your company doesn’t have a plan there are options like a SEP IRA or traditional IRA. There are many ways to save.” Hampson says. “People who have been saving, at the end ask ‘Do I have enough?’ The answer is, ‘What are your expenses going to be?’ You need to be putting together a budget to understand what your needs are going to be and you’re going to have to come up with an investment plan.
“If you’re in a 401K or a profit-sharing plan, at retirement you may be handed a check and sent off to do something with that,” he adds. “It’s really important to talk to several advisors about how they’re going to help you and what they’re going to charge. You should be thinking about this two to three years before you retire.”
A Nation of Workaholics
“Part of the preparation for retirement is coming to the realization of how to rebalance when there’s no work in the work/life balance,” Brown Taylor says. “How have you prepared to live without work? These days, most people have not prepared to do that. I think we have lots of people who have fallen into the workaholic state. They’re on the hamster wheel to earn as much as they can for as long as they can. They haven’t had the time to develop a hobby. It’s helpful if you have interests outside of work already. That’s a benefit. If you don’t, you need to come to grips with what you’ll do with your time.”
“I think attitude is always important,” she adds. “I think being positive about this transition is important. If you take on the attitude of ‘Well, I’m getting old and have to retire and I didn’t want to do that and I don’t have anything left,’ that’s going to make for some challenging years and those years are going to be a little challenging anyway, possibly because of health issues.”
“Another important piece is finding a friend group or a group of people to do things with,” Brown Taylor says. “You have that already built in in the workplace. You have trust circles, people you can share things with. That goes away and you’re forced to spend more time with your spouse or other family members. It could be the issue of ‘My husband’s about to retire and he’s going to be in my hair.’ Start developing friends outside of work.
“I have a list in my head of things I’d like to do that I don’t have time to do now,” she notes. “I have lots of interests but I just don’t have time to take from earning a living to do them right now.”
“When planning your financial future,” Light writes, “it’s best to look at yourself as two people: your current self and your future self. The second one is who you should be thinking of, not the person you see in the mirror every day.”