One of the great things about retirement is the chance to find your perfect balance between activity and relaxation. Between doing something, and doing nothing. You are no longer at the whim of a boss or a job, and you don't have to impress anyone with your can-do attitude.
First, the good news:
Running out of money usually means that you have used up all of your retirement savings and your home equity and are left with whatever income streams you might have — Social Security or a pension if you are lucky.
Retirees enjoy over seven hours of leisure time per day, according to 2019 data from the American Time Use Survey. They use their newfound free time in a variety of ways, including taking up new hobbies, relaxing at home, watching TV and lingering over daily activities. Many retirees also continue to work or volunteer.
For many older adults, boredom is their worst enemy in retirement. Sometimes retirement feels like being stuck in a limbo of procrastination with lots of free time (or lack of free time, believe it or not) but not enough motivation to actually get up and do all of those things you dreamed of.
What did retirees miss most? According to the study, 65 percent said they most missed interacting with co-workers, friends or students at work.
However, according to GOBankingRates' recent survey, few Americans feel prepared. According to our survey, 66% of Americans fear that they will run out of money during retirement.
If you retire with $500k in assets, the 4% rule says that you should be able to withdraw $20,000 per year for a 30-year (or longer) retirement. So, if you retire at 60, the money should ideally last through age 90.
While the average retirement age is 61, most people can't collect their full Social Security benefits until age 67 (if you were born after 1960).
Depression after retirement is also common. It's estimated that almost one-third of retirees in the United States develop symptoms of depression at this stage of life. Managing depression is possible, though, and self-care and support can make a difference.
For many people, the hardest tasks in retirement are establishing a structure and personal relationships to replace what they had in their work environments. Work dictated the structure of their days and weeks for decades. In retirement, that structure has to be replaced.
Once you have an estimate of your annual retirement spending, you can begin to work out how much you need overall by multiplying your annual spending by the number of years you expect to spend in retirement, figuring in an extra 3% per year for inflation.
One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement.
You may grieve the loss of your old life, feel stressed about how you're going to fill your days, or worried about the toll that being at home all day is taking on your relationship with your spouse or partner. Some new retirees even experience mental health issues such as depression and anxiety.
Yes, for some people, $2 million should be more than enough to retire. For others, $2 million may not even scratch the surface. The answer depends on your personal situation and there are lot of challenges you'll face. As of 2023, it seems the number of obstacles to a successful retirement continues to grow.
A good retirement income is about 80% of your pre-retirement income before leaving the workforce. For example, if your pre-retirement income is $5,000 you should aim to have a $4,000 retirement income.
The ASFA Retirement Standard Explainer says a comfortable retirement lifestyle would need $640,000 in super for a couple, or $545,000 for a single person.
Failing to take into account inflation is one of the biggest mistakes a retiree can make, because inflation causes the dollar to lose its purchasing power over time; meaning you need to consider the investment returns required to keep up with inflation.
Although healthcare costs take up an increasingly large chunk of overall expenses in retirement, for most retirees the biggest expense is the same one they faced throughout much of their adult lives: housing. Overall housing costs don't just include monthly mortgage or rent payments.
They Never Clearly Define Financial Freedom
So, attaining financial freedom can have a varying definition to individuals. Passive income = lifestyle expenses. Most people retire poor simply because they have no clear definition of financial freedom for their life.
Early research on the relationship between retirement and happiness is derived from psychology, and mainly describes the relationship between retirement and happiness. These studies concluded that retirement is associated with lower life satisfaction, depression, and lower happiness (9, 10).
About 29% of retirees said they wish they'd retired later because they claimed Social Security early and they regretted it.