Charles Schwab & Co. financial consultant Kimberly Segal says she recommends her clients save enough to meet 80 percent of their current expenditures when planning for retirement. But a recent survey by her firm finds that Bostonians with means aren’t necessarily hearing the message. Most are expecting to only need about half the income they earn now when they retire, even amidst concerns about healthcare and other rising costs.
It’s not as if Segal’s clientele can’t afford to save. The demographic polled by Charles Schwab are technically well off, with at least $250,000 in “investable assets and retirement funds.” On average they earn $113,000 a year, yet in retirement they expect to only need $63,000.
The disconnect is particularly striking given that the majority of survey respondents plan to continue living in the Boston area in their golden years. Only one in four said they will move to a new area, seeking a better quality of life and lower living costs when they stop working.
“We’re urging people at a younger age to look at retirement planning, prioritize current and future expenses, and take action on the plan to make them financially secure for retirement,” Segal said. “Doing it early on can alleviate concerns, especially unforeseen expenses in medical and healthcare costs.”
About 61 percent of those surveyed said that these so-called “unexpected” expenses, such as medical or healthcare costs, are at the top of their list of concerns about retirement, followed by uncertainty about future tax rates and having to significantly change a desired lifestyle. On average, respondents to the survey said they plan to work until 67 years of age, and expect to live another 20 years in retirement.
It may be that those surveyed are willing to consider continuing to work in some capacity to help offset unforeseen expenses. Only a third of respondents said they do not plan to work in retirement at all. The vast majority said they either plan to, or are thinking about, working part time in retirement, even if they expect to have enough money.
“I do see people working into their 70s,” Segal said. “Some clients change fields -- they no longer want the hassle of getting up and going into Boston. They pick up a part time job and keep themselves busy.”
Boston was one of nine cities in which Charles Schwab conducted this survey. Residents in the eight other locations – Atlanta, Chicago, Los Angeles, Philadelphia, San Diego, Seattle, San Francisco and Washington DC – answered similarly to individuals in Boston. Overall, respondents in Seattle felt the most prepared for retirement, while those in Washington, DC, expressed more hesitation.
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