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U.S. retirement preparedness is lacking: Morningstar

Didier Malagies • October 23, 2024


new study from Morningstar focused on U.S. retirement readiness illustrates that while there has been some improvement over time, general retirement preparedness is lacking.


Using data from the Federal Reserve’s Survey of Consumer Finances, Morningstar researchers analyzed data from 3,442 households before projecting 1,000 possible “life paths” for each of them. The company used savings rates, withdrawal patterns, job turnover and health care expenses to reach its conclusions.

The authors previously published two separate papers on their findings earlier this year. The bottom line, they say, is that despite certain variations across generational cohorts and income classifications, preparedness is not where it needs to be.


One positive that emerged from the results is that younger generations appear to be taking retirement preparedness more seriously. The overall rate of preparation — derived from the researchers’ modeling — shows Gen X preparedness at 53% versus 56% for millennials and 63% for Gen Z.


But the averages are far more adversely impacted by income than age. The highest income brackets across all three generations hover between 86% to 89% readiness, but the lowest income brackets range between 14% to 34% — a more significant variation with the lowest figure belonging to Gen X.


“Traditional corporate pensions may have largely vanished, but their twin replacements of 401(k) and IRA plans appear to have filled the retirement-planning gap nicely — that is, for those who have means,” said John Rekenthaler, a vice president of research at Morningstar who summarized the findings.


But there is additional nuance to be found when taking into account that financial outcomes are not “binary,” Rekenthaler said.


“Managing a 99% retirement-funding ratio is a modest failure, if at all. In contrast, a 50% ratio is disastrous,” he explained. “Determining when a disappointing retirement outcome becomes life-altering is admittedly arbitrary, but the task should be attempted. I have set that mark at 80%, which I call the ‘floor’ ratio.”

On that basis, generational readiness improves to about 75% of Americans having a “recognizable retirement,” he said, although certain habits and spending may need to be curtailed to achieve it.




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By Didier Malagies December 20, 2024
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By Didier Malagies December 17, 2024
Older homeowners have an overwhelming preference to age in place , but these circumstances can also come with unique challenges. Feelings of isolation and loneliness rank highly among these issues, but a recent study suggests that aging in place with a pet can make a big difference. The study, highlighted in Psychology Today , also noted that having pets in later life can come with its own set of unique challenges , according to Ann Toohey, one of the authors of the study who is based at the University of Calgary. The study followed initial interviews conducted in 2015 by examining how owning a pet impacted the lives of older people aging in place in their homes. According to the study, several takeaways emerged, including that the companionship of a pet makes a difference in their owners’ lives. While the companionship provided is understandably different from what is offered by another person, it also came with other potential social benefits for the seniors who owned pets. “As it happened, most of the people in this study were single,” the report in Psychology Today noted. “Having a dog, in particular, was a good way to get to know other people, so pets could also increase the size of participants’ social networks.” Finding pet-friendly housing can be an issue, according to the respondents. While the subjects were committed to keeping their pets, the housing challenges that pets can present made for a unique challenge. “Because people did not want to give up their pets, they sometimes had to accept housing that was less than ideal or even not safe due to other people in the home,” the report explained. Pets can also have other impacts on an older person’s mental well being, the study found, particularly if an older pet owner endured certain health-related challenges. “As people got older, they sometimes had difficult circumstances to deal with, such as serious issues with their own health,” the report said. “Caring for their pet provided meaning through these hard times, and a sense of things continuing to be the same, at least in some regards. In this way, the pet helped them to cope with the challenges.” Toohey added that while the seniors profiled in the study were generally committed to keeping their pets, the potential housing challenges that pet ownership can present for some older people seeking housing need to be addressed. There is a lot of potential for what she calls “companion animal relationships” to promote health in “many ways that are salient to aging.” These include spurring physical activity by walking a pet, companionship and potential involvement in pet-centric social activities with other pet owners. But certain challenges are also a factor, including the cost of pet supplies, a lack of affordable support if a pet owner becomes ill, and the need for veterinary care. There are also housing-related challenges, which could include “the prevalence of no pet rules to size restrictions to extra fees,” she said. In terms of housing policies tied to aging in place, these barriers could have the most impact, according to the report. “Greater availability of seniors’ housing that allows pets would be very beneficial and would make it easier for people to age in place with their pet,” the report said. “This would benefit those who aren’t seniors too, as more pet-friendly housing would help a wide range of people.”  This is on top of other well-documented challenges older people can face when trying to age in place. These include the high cost of long-term care , a need to create more walkable communities and housing supply illus trates that impact prospective homebuyers of all ages.
By Didier Malagies December 16, 2024
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