In spite of year-to-year variations, it’s safe to say that most Americans are living longer than ever before. Late last year, CNN reported that U.S. life expectancy had “rebounded” and is now close to the level it had reached before the COVID-19 pandemic. The average American can be expected to live 79.4 years, a figure which has been rising slowly but surely since 2022. 

That’s the good news. The bad news: retirement savings are not keeping up. 

This week we’re highlighting this article from Investopedia in which reporter Elizabeth Guevara shares some sobering insights. Financial experts are increasingly warning that, as our average lifespan increases, retirees will face a growing threat as their retirement savings, eroded by inflation, will not see them through an entire retirement.  

More and more aging Americans will feel the pinch of needing to set aside more savings, and manage those dollars more wisely, to ensure these retirees don’t outlive their money. 

At the end of her article, Guevara shares recommendations for retirees to adjust their investment portfolios in order to make their dollars go farther. But in our view, there’s a step we all need to take before choosing an investment strategy. One of the best ways for us all to be better equipped to deal with the good news/bad news of financing our retirement is to prepare and utilize a financial dashboard. More on that in a moment. 

Majority of Retirees Forced to Quit Work Earlier Than Planned 

“Americans are facing longer retirement as well as higher prices and their savings may not stretch as far as they’d like,” Guevara begins. “Not only are people living longer, but sometimes they are forced to retire sooner than they expect to.” 

This phenomenon of an earlier-than-planned retirement is very real. Another Investopedia article from late last year quotes a Transamerica survey of 2,400 retirees in which almost 60 percent said they had retired before they had planned to. Many were forced out by workforce cutbacks while others faced health issues. 

That December article states, “Advisors say this is all the more reason for pre-retirees to prepare for the possibility of having to stretch their retirement dollars for longer.” 

Retirement Savings Eroded by Persistent Inflation 

But there’s more than forced early retirement putting savings at risk. Investopedia reporter Guevara adds that stubborn inflation is eroding the spending power of retirees, leaving them with less money than anticipated. January inflation remained high, driven by the cost of staples like food and gasoline.  

While the actual impact of inflation on individual retirees varies with circumstances, the emotional toll is significant. An article on the website of Old National Bank recently reported that, among retired Americans, “the top concern was inflation eroding the value of their assets, beating out their fear of rising healthcare costs and a stock market downturn.” 

“Inflation-related concerns have intensified in recent years due to the higher-than-average prices U.S. consumers have experienced in the wake of the pandemic,” the article continued. Costs of food, fuel, and health care continue to rise, and inflation seems stuck in “a holding pattern.” Adding to retirees’ concerns, the annual Social Security COLA doesn’t seem to be keeping up.  

As the Old National report states bluntly, older Americans “worry more about running out of money than dying.” 

Retirement Account Balances Not Up for the Long Haul 

Writing in Investopedia, Guevara notes that the average retirement account balance for Americans aged 55 to 64 was $537,560 in 2022. But a deeper dive shows that figure to be misleading, skewed by high-income savers with big account balances. 

In that same table, based on statistics from the Federal Reserve, the median balance in retirement accounts was just $185,000 for adults in the 55-to-64 age group. That means fully half of those surveyed have balances below that amount. 

Data on retirement savings varies widely. The Federal Reserve reports that roughly half of all Americans in their 60s have $10,000 or less set aside for retirement. Whatever the true picture, with the average retirement age at 62, according to a 2024 Mass Mutual survey, millions of retirees will be facing an extremely challenging financial landscape. 

For her article, Guevara spoke with Salvatore Capizzi of the investment firm of Dunham and Associates. “Medical advances are promising unprecedented, unimagined longevity,” he states – “but at the same time, persistent inflation will threaten purchasing power during the longer retirements that Americans may be able to enjoy.”  

Is the Conventional Wisdom About Retirement Investing Outdated? 

Guevara’s article in Investopedia takes aim at what she suggests may be outdated thinking concerning retirees investing conservatively. 

“As you approach retirement,” she writes, “conventional wisdom dictates that you skew your portfolio to more conservative fixed-income assets compared to stocks to lower risks and earn guaranteed income.” But Capizzi from Dunham says that’s inadequate advice which could be “systematically undermining the financial security of retirees.”  

“At just 2 percent inflation, a traditionally ‘conservative’ portfolio generating 4 percent-5 percent net returns could deplete 10 to 20 years before the end of a 50-year retirement—potentially leaving your clients without resources for their final decades,” the Dunham research found. (We note that the “50-year retirement” figure sounds extreme to us.) 

Social Security benefits, the largest source of income for millions of retirees, is indexed to inflation. But unless Congress acts to shore up the program, these benefits could be facing a sizeable cut in the next decade. This could devastate millions of beneficiaries.  

The Most Important Place to Start: A Financial Dashboard 

Guevara ends her article with a few brief recommendations on investment strategies for retirees designed to help them keep up with inflation and longer lifespan. Her suggested “purpose-oriented portfolio strategy” could help workers “create a portfolio that earns more than 4 percent to 5 percent above inflation,” she states.  

However, rather than dive into those specifics, we recommend beginning with the right planning tools. “There’s no one-size-fits-all answer to planning for a secure financial future,” Rajiv Nagaich said recently. “Everybody’s situation is different. But I would start with a bigger question: do you have a financial roadmap to guide you?” Rajiv calls this roadmap a financial dashboard.  

“A financial dashboard gives you the ability to make smart decisions no matter what happens,” he continues. “That includes expected hiccups that are an inevitable part of retirement. You’ll face a sudden tax liability. Your spouse will fall ill. Your adult child will need your financial support. You’ll have to retire years before you had planned to. The list of speedbumps is endless.” 

With a Financial Dashboard, You Won’t Make Decisions in a Vacuum 

With a financial dashboard, however, you’ll have the tools to evaluate the impact of your situation and allocate your resources to meet the need. “The sooner you meet with a qualified planner and create a [financial] dashboard, the better-equipped you’ll be for whatever life throws your way,” Rajiv emphasizes.  

“But you need the right professional planner to help you. Please, I urge you – give us a call and let us put you in contact with the right adviser. Then,” he adds, “you can face your financial future with true confidence and peace of mind.” 

The final word from the Investopedia article rings true with us. “Retirement shortfalls should be fixed at the planning level,” one planner told Guevara – to which we add a hearty “Amen.”  

Rajiv Nagaich – Your Retirement Planning Coach and Guide 

The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.  

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read. 

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more. 

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.  

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone! 

(originally reported at www.investopedia.com)