Successful retirees share their financial secrets
If you're looking for retirees who are happy with the financial situation, you'll want to review TIAA's "2016 Voices of Experience" survey. It found an overwhelming percentage of retirees (86 percent) are "very satisfied" or "somewhat satisfied" with their financial health. With satisfactions levels that high, it pays to learn about the steps they took to get there.
TIAA surveyed more than 1,500 retirees -- most of whom worked in higher education (55 percent), public education (10 percent) or health care (9 percent) -- about the steps they took to prepare for retirement.
The first key step they took was to start saving early, consistently and enough. Three-quarters (75 percent) of the retirees who started planning for retirement before age 30 reported being very satisfied with their retirement. According to Cathy McCabe, senior managing director at TIAA, the average contribution to retirement accounts for its clients is 14 percent of pay, considering both employer and employee contributions.
More than half of the survey respondents (55 percent) said they expected their savings would need to last 20 years or more in retirement. This may be one reason that 70 percent of them have an annuity to provide a steady source of retirement income, and 92 percent say they're satisfied with their decision to buy an annuity.
A majority (54 percent) said they didn't need to make any financial adjustments to their lifestyle after retirement, while another 20 percent said they made only minor changes. Those who made financial adjustments bought fewer clothes and accessories (59 percent), are traveling less (52 percent) and are dining out less frequently (43 percent). About one-fifth (21 percent) moved to a smaller house.
As these retirees age, they're less likely to stay in the homes they lived in when they retired. Of retirees age 66 to 69, 68 percent are still in their home, but that percentage drops to 40 percent of those age 80 or older. Those who moved had a variety of reasons, including finding a home with a more suitable size or layout (17 percent), to be closer to family (16 percent) and to reduce maintenance costs (11 percent).
The top two financial priorities for these retirees were planning for the certainty of having enough income to cover essential living expenses (reported by 91 percent) and having enough to pay for health care (87 percent).
These items remain important for retirees as they age, but other issues become important as well. Older retirees focus more on issues that benefit others, such as charitable giving and leaving a legacy. As they settle financially into retirement, they become more comfortable thinking about what they can do for others.
The vast majority of retirees (90 percent) have medical insurance to supplement Medicare. This breaks down as follows:
- 52 percent have coverage under a group plan from a former employer or other organization
- 33 percent have purchased individual insurance
- 4 percent have both a group policy and individual coverage
Twenty-one percent have purchased a long-term care insurance policy.
What advice do these retirees have to share? Here's a sample:
- "Do not wait until you have enough retirement money to live in luxury. Retirement itself is a luxury."
- "Know your precise monthly income. Be realistic about the lifestyle that income can support, and begin to ease into it 18 months before retirement."
- "Try to ease into retirement. I consulted half-time for one year and quarter-time for another year."
As a result of the smart planning described above, fewer than one-quarter of these retirees are now concerned about running out of money. Here's one more quote from a retiree that shows it's well worth your time and effort to plan for a successful retirement:
- "There is nothing like feeling financially secure to enjoy retirement."
