Surprising Retirement Statistics
Surprising Retirement Statistics. “There are three kinds of lies: lies, damn lies, and statistics.” The phrase was popularized in the U.S. by Mark Twain. The phrase is used to doubt the numbers put out by experts.
But what about retirement? There are many surprising statistics about retirement and especially the lack of retirement savings or debt levels. Some of my readers are worried about their retirement years, and some of my readers are set. It is, however, a good idea to gain some perspective on where you stand on retirement compared to other people for retirement age, retirement savings, and debt.
Best Retirement Age
I am in the middle of taking a survey on my Twitter channel. The results so far are ~76% said they would retire before 70, and ~24% said they would not out of 42 respondents. The U.S. Bureau of Labor states that 26.6% of those 65 to 74 were still working in 2020, and 8.9% of those 75 and over are still working, which is an interesting retirement statistic. Hence, opposite to conventional wisdom, many people are working past the social security retirement age of 67 if they were born after 1959. The best retirement age can vary depending on the source of your retirement income.
Not enough retirement savings or high debt levels late in life are probably two reasons people are working into their 70s well past the conventional retirement age. Sometimes people change careers, and there are alternative jobs for retirees. But people are also staying healthy longer, and there are many social and mental acuity reasons to work longer.
Actual Retirement Ages
The actual retirement age varies depending on where you live. Americans work longer on average than people from every other country. According to the site annuity.org, the United Arab Emirates has the lowest average and official retirement age of 49. At the other extreme, the average retirement age in Japan is nearly 70, and in South Korea, it is over 72. Japan has the world’s highest life expectancy, and South Korea has the highest elderly poverty rate.
In the US, the average retirement age is 62 in Alabama, Arkansas, Kentucky, Michigan, Missouri, South Carolina, and West Virginia. The average retirement age of 65 is the highest in Connecticut, Kansas, Massachusetts, Nebraska, New Hampshire, New Jersey, North Dakota, Utah, Vermont, and Wyoming.
Statistics About Retirement Income Sources
Future retirees’ expectations about income sources vary substantially from their expectations when retired. While they are still working, most people expect social security to be the top source of income. This is followed by a direct contribution retirement plan or a 401(k), personal savings, individual retirement account (IRA), and work for pay. You can look at the entire list in the chart below. But the top five sources that retirees expect to receive income from are social security, personal savings, pension plan, IRA, and then a 401(k). This is very different than expectations.
The reality is that working during retirement is one of the 12 Retirement Myths, and that is confirmed by the data below.
The average American receives $1,514 monthly in social security retirement benefits, which is $18,170 annually, and this is an unexpected retirement statistic. This is much lower than the full benefit of $3,011 per month at age 70. Clearly, the average person does not wait to receive their social security retirement benefits. Can you live on that much? Most people cannot even if they are debt-free in retirement. Indeed, social security is supposed to replace only ~40% of earnings and will drop to 35% for younger workers. But for many retirees’ social security represents the majority of their income.
The number of retirees receiving pensions is declining. According to BLS, only 10% of companies now offer pension plans.
How Much Should I Have in My 401(k)?
This is a topic that I addressed roughly 1-year ago in an entitled How Much Should I Have in My 401(k). The dollar value for most age categories is much lower than you would think. Based on the data on retirement plans from Fidelity, the average 401(k) retirement plan in the United States has $95,600 and the average contribution rate is 9%, which is a worrisome retirement statistic. On average, the numbers go up as you get older. Average net worth numbers are higher.
Statistics About Debt In Retirement
Most retirees strive to have low debt or even be debt-free. I would love to have little to no debt once fully retired. Right now, my wife and I have one car payment and a house mortgage. We will pay off the car by next year. We are working on paying off the house mortgage early. But what about the average person near or in retirement. Reportedly, 51% of baby boomers are still paying their mortgage, and 4 in 10 are still paying credit card debt.
These numbers suggest that debt is a big problem for retirees. The data suggest that debt is a major or minor problem about 33% of retirees, which is a surprising statistic about retirement.
Final Thoughts on Surprising Retirement Statistics
The above data clearly shows some surprising retirement statistics. There are many more statistics about retirement, and I leave it up to you to check some of the references I cite. Many people are not financially ready to retire. Are you?
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Chart or Table of the Week
Today I highlight Scott’s Miracle-Gro (SMG). Scott’s Miracle-Gro stock price is down (-27.8%) year-to-date and trading near a 52-week low. This is the greatest decline of any Dividend Contender. The company is facing high inflationary pressures on its commodity inputs. This is cutting margins and thus profitability. The current price-to-earnings ratio is ~15.5X versus the long-term average of about 22.5X in the past decade. The dividend yield is only about 1.86% compared to an average of 2.11% in the past 5-years. The company has raised the dividend for 12 consecutive years. The trailing 5-year dividend growth rate is 5.46% CAGR, and for 10-years it is 12.33% CAGR. The dividend is safe with a ~29% payout ratio. There is the risk that margins stay depressed, but investors may want to check the stock. The screenshot below is from Stock Rover*.
Source: Stock Rover*
Dividend Increases and Reinstatements
I have created a searchable list of dividend increases and reinstatements. I update this list weekly. You can search for your stocks by company name, ticker, and date.
Dividend Cuts and Suspensions List
I updated my dividend cuts and suspensions list at end of August 2021. The number of companies on the list has risen to 530. We are well over 10% of companies that pay dividends having cut or suspended them since the start of the COVID-19 pandemic.
There are three new companies added to the list this past month. These three companies are Eneti (NETI), International General Insurance (IGIC), and Washington Real Estate (WRE).
Dow Jones Industrial Averages (DJIA): 34,583 (-0.07%)
NASDAQ: 15,044 (-0.47%)
S&P 500: 4,433 (-0.58%)
The S&P 500 is trading at a price-to-earnings ratio of 34.6X, and the Schiller P/E Ratio is at about 38.3X. These two metrics were down the past two weeks
. Note that the long-term means of these two ratios are 15.9X and 16.8X, respectively.
I continue to believe that the market is overvalued at this point. I view anything over 30X as overvalued based on historical data. The S&P 500’s valuation came down as companies in the index reported solid earnings lapping a Q2 2020 that had depressed earnings.
S&P 500 PE Ratio History
Shiller PE Ratio History
Stock Market Volatility – CBOE VIX
The CBOE VIX measuring volatility was flat this past week to 20.81. The long-term average is approximately 19 to 20. The CBOE VIX is a measure of the stock market’s expectation of volatility based on S&P 500 index options. It is commonly referred to as the fear index.
Fear & Greed Index
I also track the Fear & Greed Index. The Index is now Neutral at a value of 34. This is flat this past week. This Index is a tool to track market sentiment. There are seven indicators in the Index that are measured on a scale of 0 to 100. The Index is calculated by taking the equally-weighted average of each indicator.
These seven indicators in the Index are Put and Call Options, Junk Bond Demand, Market Momentum, Market Volatility, Stock Price Strength, Stock Price Breadth, and Safe Haven Demand.
Junk Bond Demand is indicating Extreme Greed.
Safe Haven Demand is in Extreme Fear.
Market Momentum is indicating Fear.
Put and Call Options are signaling Extreme Fear.
Market Volatility is set at Extreme Fear.
Stock Price Strength is signaling Extreme Fear.
Stock Price Breadth is indicating Extreme Fear.
Source: CNN Business
The U.S. Bureau of Labor Statistics reported the consumer price index rose 0.3% in August; this follows a 0.5% increase in July. The index’s year-on-year rate is up a seasonally adjusted 5.3% from a year ago. Core CPI, which excludes the more volatile food and energy costs moderated some, increasing 0.1% in August, this is the smallest increase since February 2021. The annual rate of Core CPI inflation dropped to 4.0%, this follows a 4.3% reading for the one year ending in July.
The Commerce Department reported advance retail sales increased 0.7% to $618.7B in August, following a downwardly revised 1.8% in July. Excluding autos, sales advanced 1.8%. Retail sales are tracking some 15.1% higher than August 2020. Total sales for June 2021 through August 2020 were up 16.3% year over year. Sales increases were reported in internet retail (+.5.3%), furniture and home furnishings (+3.7%), department stores (+2.4%), retail trade (+0.8%), building materials (+0.9%) and gas stations (+0.2%). Sales decreases were reported in electronics and appliance retails (-3.1%) and sporting goods (-2.7%).
The Labor Department reported slightly higher initial jobless claims for the week ending September 11. Last week’s figures are the first since the federal boost to unemployment insurance payments expired. The seasonally adjusted initial claims came in at 332,000, an increase of 20,000 from the previous week’s upwardly revised level. The four-week moving average, which smooths out volatility was 335,750, the lowest level since March 2020.
Thanks for reading Surprising Retirement Statistics – Week in Review!
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.