According to the American Institute of CPAs (AICPA), running out of retirement savings is a top concern among retirees. Healthcare costs and maintaining lifestyle are the other two in the top three.
Despite uncertainty and concerns surrounding retirement savings, a recent study and corresponding Bloomberg article found that “Americans are most upbeat” they will retire comfortably.
A University of Michigan index measuring whether they see a comfortable retirement reached the highest level since December 2000 last month. Despite recent market fluctuations, years of gains in equities have boosted the value of household retirement accounts: The S&P 500 Index has more than doubled since the survey’s last high through Feb. 14, and more than quadrupled since its recession low in March 2009.
The University of Michigan index measures whether people foresee a comfortable retirement now versus five years ago.
The recent Bloomberg article took previous index data back to 2000, which includes two major recessions. The data shows that just before each major recession, retiree optimism peaked. If optimism is peaking again, could we be heading toward another major recession?
While we don’t know for sure, this optimism may be misplaced. The AICPA survey revealed that another big concern clients had about outliving their retirement savings was “market fluctuations.” If that is the case, the idea that markets are uncertain should play a role in retirement planning.