Retirement at a Glance

1. THE BEST-LAID PLANS OF MICE AND MEN – A federal study of when and why workers retire confirms the probability that some workers who plan to work past retirement age may not get to: 29% said a health problem was a factor in their decision when to stop working, 15% said they retired to care for a family member and 10% said they were forced to retireor work was not available (source: US Federal Reserve).

2. KEEP UP THE GOOD WORK! – More employees with access to employer-sponsored financial wellness services are using those services, including coaching, workshops, webinars and online tools. Usage grew from 51% of employees with access in 2012 to 68% at the start of 2023 (source: PwC).

3. $4.21 FOR 12 EGGS! – Those who retired before 2000 (now age 85 and older) have lost 36% of their buying power to inflation since they retired. They would need $516.70 more income per month to maintain the same buying power they had in 2000 (source: The Senior Citizens League).

4. THE INCREDIBLE SHRINKING DOLLAR – Savers need to understand the effects inflation will have on their retirement income. The fastest-growing costs of older Americans between 2000 and 2023 are eggs (332%), out-of-pocket prescription drug costs (311%), heating oil per gallon (279%), general dental services (275%), Medicare Part B standard monthly premiums (262%) and homeowner’s insurance (193%) (source: The Senior Citizens League, US Bureau Labor of Statistics).

5. BAD TIMING FOR LATE BOOMERS – Late Boomers, who reached their 40s in the early 2000s, saw their earnings flatten and then decline after the Great Recession without recovering. So, too, did their 401(k) participation rates and balances, which were well below those of Early and Mid Boomers (source: Center for Retirement Research at Boston College).

6. THINGS THAT MAKE YOU GO HMMM – A recent study of 28 retirement plans between 2014 to 2016 found that 41.4% of employees cashed out their 401(k) savings when they left their employers, with 85% draining their accounts completely. The study also found that pre-retirement leakage increased slightly with more generous employer matches and when a higher percentage of account assets were from employer contributions (source: Marketing Science).

7. YOU DO YOU, BUT ... – The average company contributions as a percentage of payroll in 2021 was 4.4% for 401(k) plans and 6.4% for 401(k)/profit sharing plans (source: Plan Sponsor Council of America).

8. GAINING SPEED ON THE WAY DOWN –The Social Security Board of Trustees’ 2023 report projects the Social Security Administration (SSA) will be able to pay out 100% of retirement benefits until 2033, one less year than projected in 2022. At that time, OASI fund reserves will be depleted, and ongoing income would be enough to pay 77% of scheduled benefits (source: SSA).

9. LONGEVITY SOLUTION, WITH PERK – SECURE 2.0 eliminated the 25% of account balance limit and increased the dollar limit on retirement savings that may be used to purchase a qualified longevity annuity contract (QLAC) inside a defined contribution (DC) plan or IRA. Up to $200,000 may be used to purchase a QLAC, which will be excluded from required minimum distribution (RMD) calculations until QLAC payments begin, which can be delayed until age 85 (source: SECURE 2.0 Act of 2022, Sec. 202).

Source: MFS Investments