"Most Americans Aren’t Ready for Retirement. How to Prepare, According to a Researcher."
That's the title to a Barron's article that interviewed retirement researcher Dave Goodsell. The answers to the questions he was asked were very thin as published/edited. Hopefully this list puts a little more meat on the bone versus the original answers.
1. Last year was a terrible year for the markets and a terrible year to retire. What is the takeaway?
It is very important to manage for sequence of return risk. That is to raise some cash to cover some period of expected expenses in case your retirement date ends up being very close to a huge decline in the capital markets.
2. It was a shock for many investors that bonds fell 13% last year. What is the story with fixed income this year?
Longer duration bonds have become sources of unreliable volatility. They should no longer be relied upon to offset stock market volatility.
3. Social Security is supposed to replace around 35% to 40% of the average preretirement income. Are people prepared to fund the remaining 60% to 65% on their own?
Based on studies from places like Fidelity, the answer is no. More usefully, what is your expected SS payout? What would the payout be if they follow through and cut benefits by 23%? What will your post retirement expenses be? Remember you might not have a mortgage, you won't be saving for retirement after you retire. How far will your SS payout go to covering everything? If there is a gap between what you're likely to spend and what SS will pay, then you've gotta start solving that issue right now, don't wait. Great if savings will cover the gap but what if it doesn't?
4. "The amount of 55-60 year-olds I meet who are afraid to even look at their savings and investment accounts is mind boggling."
That was actually a reader comment. Being smack in the middle of that cohort, the comment caught my eye. Most of my Facebook friends are from high school and college. Are many/most of them afraid to look at their account balances? I don't know. Are they well-saved due to some sort of selection bias? Quite a few appear to be very successful but are they saving money in addition to living well? I don't know.
My older sister's ex-husband has always made a ton of money but never really saved anything at all. Honest to God, I don't know what they spent it all on. A college buddy told me his particulars of not having a ton of money but a decent sum to be sure, he's inline for some sort of pension but gave the impression it wasn't huge but having lived in a quaint California beach town for a very long time, he and his wife are sitting on a mountain of home equity. They can probably make it work without selling at a relatively young age but the equity does give them tremendous optionality.
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