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4 Shocking Statistics to Improve How You Look at Your Retirement

By Kailey Hagen – Sep 19, 2019 at 4:45PM

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At least one of these facts should surprise you. And a few may worry you.

Many Americans have trouble estimating how much they need to save for retirement, and as a result, they save too little. Retirement statistics may have little bearing on a particular individual's situation, but they can be a useful starting point if you're unsure whether your estimates are within a reasonable range.

Here are four of the most important -- and surprising -- retirement statistics that could change your mind about your retirement expenses.

1. One in three 65-year-olds today will live past 90, and one in seven will live past 95

The average life expectancy in the U.S. is currently 78.6 years, according to the Centers for Disease Control and Prevention. But this is a lowball estimate for many, weighed down by increased rates of drug overdoses and suicide deaths among younger adults. Data from the Social Security Administration says one in three 65-year-olds today will live into their 90s, and one in seven will surpass 95.

Surprised man.

Image source: Getty Images.

If you've been basing your life expectancy on the national average or on your best guess, you could be figuring too low. That could cause you to underestimate your total retirement cost by several years' worth of living expenses. It's best to always figure high when calculating your life expectancy. You'll have a larger inheritance to leave to your heirs if you don't need it all, but if you do, you'll be glad you had the foresight to plan for a long life.

2. The average household headed by an adult 65 or older spends nearly $50,000 per year

Many people tend to assume that living expenses go down in retirement, but this isn't always the case. If you plan to travel often or buy some big-ticket items, your spending could actually increase. For most retirees, it remains about the same or decreases slightly. Still, it's higher than many realize. The latest Bureau of Labor Statistics data shows that the average household headed by an adult 65 or older spends $49,542 per year.

This figure could be higher or lower depending on where you live and your spending habits, but as inflation continues to rise, you can expect this average to begin to creep up as well. Social Security may cover some of your expenses, but you'll have to save the majority of this amount on your own. If you haven't done so already, total up your living expenses, including food, healthcare, insurance, housing, transportation, and entertainment, and come up with a yearly estimate. Multiply this by the number of years of your planned retirement and add 3% annually for inflation. This should give you a fairly accurate sense of the true cost of your retirement.

3. Social Security can only continue to pay everyone their full benefits until 2035

The latest Social Security Trustees' Report says that the trust funds for the program only have enough money to pay everyone their full benefits until 2035. After that, it will only be able to afford to pay out 80% of scheduled benefits unless the government reforms the program. We don't know what the changes will look like yet, but proposed suggestions include:

  • Reducing benefits
  • Raising the ceiling on income subject to Social Security tax ($132,900 in 2019)
  • Raising the full retirement age (66 or 67, depending on birth year)
  • Reducing cost-of-living adjustments (COLAs) that help benefits keep pace with inflation
  • Raising the Social Security tax rate (12.4% split evenly between employee and employer)

The government could enact one or a combination of these reforms in the future, and there's a good chance that Social Security benefits won't stretch as far then as they do today. They're certainly not going to disappear entirely, but future generations will probably have to rely more heavily on their personal retirement savings than current retirees do. So prioritize your retirement savings if you're not already.

4. The average 65-year-old couple will spend $285,000 on healthcare in retirement

Fidelity estimates that a 65-year-old couple retiring this year could spend $285,000 on healthcare expenses. Similar surveys place this amount even higher -- as much as $363,000 -- particularly for couples who have higher-than-average medical expenses. You can also expect your costs to be higher if you're a long way from retirement, because medical inflation rates often outpace the general inflation rate, so healthcare expenses rise quickly.

Medicare will cover some of your retirement healthcare expenses, but you'll still have to afford premiums, deductibles, and copays if you need to visit the hospital. The above figures represent your out-of-pocket costs, not including what Medicare pays. Consider increasing your retirement savings goal if you haven't accounted for healthcare. Boosting your savings rate may leave you less cash to spend today, but if you haven't prepared for healthcare, a major medical expense in retirement could decimate your savings.

Some of these statistics may sound frightening if you're already concerned about saving enough for retirement, but it's better to know what you're up against so you can try to form a plan. If any of the above facts surprised you, take a moment to review your retirement plan and consider making changes so that you can save enough to cover all your expenses.

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