- I'm sure you hope to retire one day,
but planning for retirement can be a little bit difficult
because leading up to that point,
we have certain expectations
for how things are going to play out,
and as we all know reality doesn't always align
with those expectations.
I came across some data around expectations
versus reality when it comes to saving for retirement.
I wanna show you these to help answer some questions
that you might have
or bring to light a few things that you didn't even know
that I think you should.
Don't worry, we'll cover the whole topic
around social security running out.
I'll share some things that I learned
from some experts in this field.
Nowadays, most people in their 40s hope to retire by 65,
but as you can see
the likelihood of that happening is only yet 60%.
As people get older, the target slowly increases.
This could have something to do with people realizing
that they either don't have enough money saved up
to reach that target, or they realize
that they do wanna continue working a little longer
because work gives a lot of people fulfillment.
Realizing they don't have enough saved up
makes me think about all the older people
that I talk to who say that one thing
they wish they would've done
is invest more money a lot sooner.
Us younger people need to take note
of the wisdom from older people.
I have never met someone who complained
about saving and investing too much money for retirement.
- Oh, boohoo.
Let me play a sad song for ya
the world's smallest violin.
- Another reason those target retirements change over time
is because we plan it based on a straight line
like things are gonna go perfectly
and everything is going to stay the same
but as we all know, life is crazier
than the WWE matches than I used to watch as a kid.
When asked how many times
throughout their life they changed retirement savings plans
47% said they changed one to two times.
37% said three to five times.
9% said six to nine times.
And 8% said 10 plus times.
The people who said they changed their plan 10 times or more
were also the people who said that they've been remarried
at least four times.
I'm just kidding, I just made that one up.
In all seriousness, this makes complete sense.
Your life five years ago probably
looks a lot different today
and it's also going to look even more different
10, 20 or 30 years from now when you eventually retire.
Career and family events were the two biggest reasons
that there was a change in retirement savings plans.
Making more or less money would naturally trigger this.
Get married, have kids, have to move,
these things will change a lot of our finances.
This one was interesting to me.
The fourth largest reason
was because of living above my means.
What?
People, have we learned nothing?
Any of you who have watched my channel long enough,
know that I have zero issue with spending money
as long as you stay within your predetermined income
to saving to spending ratio
that I laid out in my money management video.
When it comes to income sources in retirement,
expectations versus reality differ greatly
between non-retirees and retirees.
53% of people who aren't retired expect
to have enough money to live comfortably
when they're retired,
while 80% of people who are retired
report having enough money to live comfortably.
I look at that gap
in these two realities in two different ways.
Number one, a fear of the unknown
when it comes to the future.
It's this point in time that's just this black void
and it sits there as we slowly move towards it while we age
what's in that retirement black hole of nothingness
but who the heck knows?
I'm generally a pretty optimistic person about the future,
but I'd be lying if I said
that I didn't have a little pessimistic Jared
sitting on my shoulder whispering in my ear
about the unknown future from time to time.
And to number two, the fact that 80% of retired people
report having enough money
to live comfortably reminds me that humans
are really good at adjusting to different things,
whether it's because they end up having enough money
or they end up with less than expected,
I don't think we give ourselves enough credit
for how good we are at adapting when reality
is a lot different from our expectations.
I'd imagine that every single one of you watching this
can think back to a time where you overcame some stuff.
Yeah, reality was pretty ugly in the moment
but you adjusted and got through it,
and the only reason you are the person you are today
is because you were able to adjust
to whatever it was that was going on.
Do your best to set yourself up for retirement,
and find some peace in knowing that no matter what happens,
you are going to figure it all out.
Before I tell you about expectations
versus reality when it comes to income sources
in retirement, thanks to Blinkist for sponsoring this video,
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We can actually take this one step further
and look at expectations
versus actual sources of income in retirement.
This is helpful because we all think
that we know how retirement is going to to play out
but the reality is usually very different.
49% of non retirees expected
retirement related investment accounts to be a major source
of funding for the retirement
and 31% said that it would be a minor source.
In reality, 35% of actual retirees
said that it was a major source of funding
while 26% said that it was a minor source.
What's extremely interesting
is that 39% of those retirees
said that these retirement accounts
weren't a source of funding for retirement at all.
Now, that could either be
because they didn't have much retirement savings
to live off of to begin with,
or because social Security was able
to cover more than they had expected.
So let's take a look
at social security expectations versus reality.
38% of non retirees expect social security
to be a major source of funding in retirement
and 47% expect for it to be a minor source of funding.
Us younger people might be pleasantly surprised to find out
that 57% of retirees say that it is a major source
and 32% say that it's a minor source.
I'm a glass half full kind of person
so I look at this as retirees
realizing that social security payments
end up covering a lot more of their expenses
than they expected.
This doesn't mean that you should slow down
on your investing for retirement
but it should give you a little bit of hope
about your future concerns
around having enough money in retirement.
For anyone younger who is worried
about not getting social security in retirement
because you think it'll be gone,
I have a stat that I'll cover
later in the video that will probably change your mind,
so wait for that.
If you want to help support my dog, Molly,
as well as this channel, then hit that thumbs up button
and share the video with a friend
that you think needs to see it.
When it comes to home equity, this isn't a surprise to me
but it might be for some of you.
22% of non retirees assumed
that it would be a major part of funding retirement
and 45% figured that it would be a minor source.
In reality, only 17% of retirees
said that this ended up being a major source
while 23% said that it was a minor source
and 59% said that it wasn't even a funding source at all.
The reality is that the equity in your home is great
if you are eventually going to downsize
into a smaller lower cost home,
if you use it for nursing home expenses in the future
and for the people who will inherit at home
when you pass away.
Until then, it's kind of just money
that's sitting there doing nothing
which is why I personally calculate my net worth
with and without my home equity
while focusing more on the number without my home equity.
I know that's very unpopular opinion, but hey,
that's just what I do.
Part-time work is another one where expectations
versus reality were wildly different.
21% of non retirees expected this to be a major source
and 45% a minor source
while just 2% of retirees said that it was a major source,
13% said that it was a minor source
and a whopping 85% of retirees
said that part-time work was not an income source.
What a bunch of lazy people.
Thinking that they can freaking work their whole life
then just take off forever.
What a bunch of losers.
I'm sure this changes
as you get into your later retirement years
but I was actually surprised
that part-time work was essentially non-existent
for most of them.
I kind of just assumed that, I don't know,
I would be doing some sort of work even in retirement.
Expectations and reality around money
from inheritance is pretty low across the board
which doesn't really surprise me
since most self-made people come from nothing to begin with.
People are rightfully worried
when it comes to social security running out of money.
As of 2023 the average monthly payment is $1,827.
51% of 50 to 64-year-olds,
49% of 30 to 49-year-olds
and 33% of 18 to 29-year-olds
are worried about social security running out.
If all you did was read the headlines
of the fear-mongering news,
then yeah you should freak out a little bit
and I'll admit that the rumors are actually true.
Based on the current system
the funds will run low enough by 2034
that 81 million people will have to take a 20% cut.
But there are enough levers that can be pulled
to fix the problem long enough
so that no one watching this should be worried about.
First of all, all of those scumbags
in Congress haven't updated the revenue
and benefits formula since 1983, 40 freaking years ago.
And it's not like they didn't know this issue
wasn't coming down the line.
Actuaries made them fully aware of this in the mid 1990s.
Let's just call it what it is.
Those idiot politicians from all sides,
use it as a bargaining chip to throw back and forth
to get reelected and keep all of us normies
confused, anxious and annoyed,
and the mainstream media, oh my gosh
those people love to throw it in our face to freak us out
and get more clicks.
I was out to dinner with a friend the other day
and she told me how she was worried about this
because she's been hearing about it all over the news.
I told her exactly what I'm gonna tell you.
Don't worry about it.
Here are some of the trade-offs they have
that they've actually already used in the past.
Before I give you these,
I want to acknowledge that I understand
that there are downsides to all of these trade-offs.
Economist Thomas Sowell said it best.
- There are no solutions.
There are only trade-offs.
And whatever you do to deal with one of man's flaws,
it creates another problem,
but that you try to get the best trade-off you can get,
and that's all you can hope for.
- One of the trade-offs is to increase
the full retirement age by one year to 68 years old.
This could be a viable option,
because we live longer nowadays
compared to when social security was created.
1940 was the first time that social security paid benefits.
At that time, the average 65 year old
would live about 13.7 years longer,
so we'll just call it age 79.
Nowadays, the average 65 year old lives 20 years longer,
so that's an increase of about six years.
The only time they raised the full retirement age
was back around in 1983 when they raised it from 65 to 67.
When you look at it from that angle, it would make sense
to possibly increase the full retirement age
by one year since we do live longer.
Keep in mind that back when they increased the age
from 65 to 67, it didn't happen overnight.
They phased it in over a four decade period.
Long enough that it didn't screw over people
who were close to retirement
and long enough for younger people like me
to plan and start saving more to account
for the added years.
Another option they have
instead of increasing retirement age
is adjusting the tax rate.
The last time they increased taxes
for social security was back in 1977.
When I heard that, I was like, wait what?
You haven't raised it in 46 years?
Don't get me wrong, I don't wanna pay more taxes
but I think you should have increased it at least once
maybe twice in 46 years.
Once an individual reaches an annual income
of about $160,000, they don't pay any social security tax
on money that's earned above that amount.
Instead of the 6.2% social security tax rate
being capped at $160,000, they can either increase
or remove the capped dollar amount altogether.
Remember trade-offs?
Yes, they might have to update
certain social security benefits
for those higher earners,
but we're not gonna get that far into the weeds
in this video.
Completely removing that income cap
would fix about 75% of the problem
and increase social security solvency by at least 75 years.
At the end of the day,
social security is probably one of the,
if not the most popular social benefit in the United States
and any political figure who ever tried to get rid of
or reduce it for retirees or soon to be retirees
would be voted out of office as quickly as possible.
There's more levers they can pull
beyond the two that I just mentioned.
Something at the end of the day will eventually get done
but I just don't know what that'll be.
For us younger people,
worst case scenario is that it's reduced
and we'll have enough of a heads up to prepare for.
Please for god's sakes, try to keep the political talk
to a minimum and respectful in the comments below.
Let's just all agree
that all politicians are complete scumbags
and leave it at that.
When Americans were asked to give themselves a grade
on their retirement savings, the majority of people
under the age of 70 gave themselves a C or lower.
I was curious how my audience would rate themselves
so I put out the same poll to them.
These polls go out to more people than just my audience,
but here's the current demo that's watched my videos
over the past 28 days.
Here are the results.
Nice job to the A, B, and C people.
If you haven't done it yet, then go vote on that poll.
If you want to get a decent idea
of how you are actually doing
compared to the grade you gave yourself for this one
then I'll have some free tools
down in the description below
where you can track your net worth
as well as a free retirement planning tool
to help see if you were on track.
How many people have withdrawn money
from retirement accounts before retirement age?
Look at the percentage of people in their 40s and 50s.
My mind was blown when I saw this.
If any of you have watched enough of my videos
then, you know, this is one of my biggest pet peeves.
This is such a stupid, short-sighted thing to do.
I get it.
There are outlier scenarios
where someone has to withdraw money,
so I'm not talking about those people.
But no freaking way, there's this many emergency cases.
People, stop withdrawing money
from your retirement accounts before retirement.
Don't even think of it as an option.
This isn't your money.
This money belongs to the 65-year-old you.
Sorry to get all hot and bothered there for a second.
This just bugs the crap out of me.
If you have a proper emergency fund, then use that,
and if you don't, then start getting it in order
because the next thing you know you are going to be forced
into retirement and really wishing
that you didn't withdraw early
from those retirement accounts.
Check this out.
50% of retirees said
that they were retired earlier than they would've liked to.
The primary reasons were health-related or laid off.
We all need to be prepared
for those unexpected events and pulling money
out of retirement accounts early is going
to leave you broke, stressed out, anxious,
and not living a very happy life.
Don't forget to hit that thumbs up button
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I'll see you in the next one.
Friends.