Pre-retirees should be looking just over the horizon at their golden years. However, many say retirement appears to be slowly receding into the distance.
Many workers — 42% — between the ages of 55 and 65 say the economic conditions of the past five years have caused them to delay, alter or cancel their retirement plans, according to a recent survey by the Nationwide Retirement Institute.
Overall, 59% of pre-retirement investors say their retirement expectations have shifted significantly in the past five years. As part of that shift, they are now abandoning three rules of thumb that have been standard retirement wisdom for many years.
In a summary of the survey findings, Craig Hawley, president of Nationwide Annuity, says:
“It’s not surprising that pre-retiree investors are questioning whether their dream retirement is even possible as they grapple with lingering inflation, market volatility and concerns about running out of money in retirement. As a result, we’re seeing many of them abandon conventional retirement strategies used by previous generations.”
The three rules of thumb that people are abandoning are:
- The 4% rule. According to this rule, retirees are to withdraw no more than 4% of their retirement savings annually in order to make their money last throughout their post-work years. Today, 35% of pre-retirees say the rule is not relevant in the current economy, and 13% of them are abandoning the rule altogether.
- The “100 minus your age” rule for stock allocation. Many people struggle to decide how much of their savings they should invest in the stock market. One rule of thumb says you should take your age, subtract it from 100, and use the resulting number, as a percentage, to determine how much to invest in equities. For example, someone who is 55 would keep 45% of their savings in stocks (because 100 minus 55 is 45). However, 53% of those surveyed say the rule is not relevant in today’s environment.
- A target retirement savings goal. Sometimes known as the “magic number,” this is the specific amount of money someone aims to accumulate prior to retirement. But 52% of those surveyed are giving up on this concept.
In addition, 64% of pre-retirees no longer believe that the norm of retiring at 65 applies to them. That is up from 59% who felt that way one year prior.
However, financial advisors say they still believe in these rules of thumb, with 84% still committed to the 4% rule and 73% saying the “100 minus your age” rule is still relevant.
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