How to Beat the Retirement ‘Crisis’

Your clients may be overestimating how much money they really need to save for retirement

The key to a secure retirement is a common-sense approach to saving and spending, Ciemiewicz says. The key to a secure retirement is a common-sense approach to saving and spending, Ciemiewicz says.

The trick to beating the retirement “crisis” is good old-fashioned common sense, according to Sean Ciemiewicz, principal at Retirement Benefits Group. 

Ciemiewicz told ThinkAdvisor on Friday that fears of huge retirement shortfalls are the result of media conditioning, and investors who take a good look at their retirement needs may be pleasantly surprised.

“There’s definitely a need for people to get some help,” Ciemiewicz acknowledged. However, he said, “what I’ve found through most of my discussions is that people are not as bad off as they think and they’re conditioned to believe.”

He referred to advertisements that emphasize retirement shortfalls. “One of the things that really frustrated me, and I know they don’t do these commercials anymore, but ING had these commercials of people carrying these big numbers under their arm — $2.5 million, $3 million, one guy said, ‘I need a gazillion dollars to retire’ and those types of things — and what ended up happening is I think people just got scared,” Ciemiewicz said. “Because the media and everybody’s telling them that we have this major crisis, people were conditioned to believe, ‘I’m never going to have enough.’”

That leads to one of two things happening, Ciemiewicz said: Investors give up, or they panic and plan on working forever.

Ciemiewicz said he’s worked with people who “retire with a few hundred thousand dollars in their 401(k) plan and do just fine in retirement, and I’ve had people who retire with millions of dollars in their retirement savings and they blow through it in 10 years. If you have a good, common-sense approach to retirement, there are a lot of good things that can happen.”

For example, clients might need to readjust their expectations for what retirement will look like for them.  

“I live in San Diego, but I know for a fact that I’m not going to retire in San Diego,” Ciemiewicz said. “It’s about a 35% higher cost of living in San Diego than many other places in the country. So why not move to one of those other places with a lower cost of living?”

Ciemiewicz stressed the importance of paying off debt prior to retirement. “If you have no debt, no house payment, no car payments, nothing other than your basic living expenses — it’s amazing that Social Security can actually cover a tremendous amount of that.”

He added, “I look at it like it’s all about cash flow. If you can work through your cash flow steadily and not have to deal with huge issues in cash flow, you can be in better shape than most people believe.”

Ciemiewicz noted that the investors he encounters with huge savings aren’t particularly wealthy, they just have reasonable expectations about spending.

“The people I see who have the multimillion [dollar] 401(k) plans, they are typically already living a fairly frugal life,” Ciemiewicz said. “These are generally engineers or other people, they might be in an $80,000- to $150,000-a-year job, but they never really overspend. If you spend your money wisely and reasonably, and you don’t buy a fancy car but a practical car, if you make extra payments on your house, if you save that money you end up with a lot in the end.”

To help clients realign their expectations about what they need in retirement, Ciemiewicz suggested “backing into” planning by breaking down their expenses, then moving on to what their income will be with Social Security and other retirement income.

While for some people, retirement may not be the crisis they’ve been led to believe, others are looking at significant shortfalls. “There are some people who are just going to be stuck unfortunately,” Ciemiewicz said.

Some investors may have to accept that they might have to work until age 70 or 75, Ciemiewicz said, but there are other things they can do to help meet that shortfall.

“If you’re getting your Social Security, can you go to part-time work? It could be downsizing your house. It may be that it’s less expensive to rent than it is to buy,” Ciemiewicz said. “If they can get some common sense thoughts on how they’re doing things and if they can work through not overspending on a regular basis, they can end up doing well.”

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