Most imagine retirement as a time of boundless leisure time, month-long vacations, and worry-free days. But for many retirees in the time of COVID, this is not the reality they face. According to a new study by Clever, many have not been saving enough, putting them in dire straits during the pandemic. Instead of playing tourist, many of these retirees are taking on part-time jobs just to cover living expenses.
The average retiree has just more than $175,000 in retirement savings — only 39% of the savings recommended before removing oneself from the job force. A shocking two-thirds have less than $50,000 in retirement funds.
Many are relying on social security income (SSI) to get by, which may be risky business, as SSI only pays $1,500 per month on average, much less than the typical monthly spending of $3,900.
According to the study, just a third of retirees think they were well-prepared financially for retirement. Most (56%) said they waited too long to start saving for retirement. About 63% said they wish they better understood savings and investments when they were working.
Half of retirees said they had to cut back on spending and expenses in order to retire. About a fourth of respondents said they fear outliving their retirement funds, and more than 40% worry about social security ceasing to exist.
According to the Bureau of Labor Statistics, retirees’ average total take-home income is just under $40,000 annually, while their usual spending is above $47,000 — despite reducing their standard of living. In fact, 60% of retirees have struggled to pay for necessities since the start of the pandemic. This includes 47% who have had trouble paying their medical bills and 32% who have had trouble paying mortgage or rent.
In 2020 alone, instead of reducing their debt as they age, retirees have more than doubled their debt — bringing their average amount to $19,200 in non-mortgage debt. While this amount is still less than the average amount of debt for non-retirees, their debt is trending in the wrong direction.
Of those surveyed, 59% of retirees retired earlier than planned. Almost all of these retirees were forced into retirement. Of those who retired early, 65% did so due to health issues and 22% because of job loss. The COVID-19 pandemic has confounded these issues.
For those forced into retirement, it’s a lose-lose situation. These retirees are left in a tough financial spot with the double whammy of less money saved for retirement and those funds needing to stretch on for more years.
Not only are fewer retirees able to travel as they had once dreamed or actually retire, some are also struggling to pay for necessities such as their rent or mortgage. In fact, the fastest-growing segment of the homeless population are those over 50 years of age. For at least half of these people, this is the first time in their life they have been homeless. This may mean their homelessness has been the result of little to no savings and bad luck — maybe a lost job, a serious illness, or death of a spouse.
While some communities may be striving to build affordable housing for seniors, these retirees can end up sitting on a waitlist for years. According to findings by The National Investment Center for Seniors Housing and Care, by 2029, about 54% of middle-income seniors won’t be able to pay for senior housing, even after using the proceeds from selling their existing homes quickly.
Instead of disappearing to the Florida beaches after retirement, the reality for most retirees is taking on a part-time job just to pay bills. The problem is two-fold — retirees haven’t adequately prepared for their retirement (or retired early due to health issues) and now they’ve lost their earning power and their retirement savings is dwindling.
At the top of their worries is affordable housing — seniors will be looking for long-term rentals at a reasonable rate. Once they find that, they’re likely to stay for years. As a real estate investor, this could be a good market on which to focus for the future.