Are you silently freaking out about retirement? It may not be as bad as you think.

By Brett Arends

Amid all the gloom and doom, there are ways to change the math in your favor

It's probably not as bad as you think.

A new survey by insurance broker NFP says nearly half of workers can't even afford to save for retirement at the moment.

And one from financial company Schroders says even most workers who are participating in company retirement plans think the math is almost hopeless. On average, they think you need $1.2 million saved up. Half of them have less than $500,000.

These findings are pretty much par for the course.

In short: If you are silently - or not so silently - freaking about retirement, you are not alone.

But here's the good news: These figures, such as $1.2 million, are completely bogus. They are plucked out of thin air. They are not based on any serious calculations.

For starters, most of those who are actually retired say their finances are much better than they feared they would be. The latest Gallup poll found just 45% of working people expected to have enough money in retirement to be able to retire comfortably. But among those who had actually retired, 82% said they had enough.

The figures have been much the same for years, both at Gallup and when tracked by the Employee Benefit Research Institute, a think-tank.

One reason: As Fred Brock of the New York Times pointed out a generation ago in his best-selling book, most of us can retire on much less than we think. Our living costs will typically be much lower than when we worked. And as we no longer need to live near our jobs, we can move somewhere cheaper - maybe much cheaper.

These are levers we can pull that change the math in our favor.

"Many people, in surveys conducted by AARP and others, say that they want to retire right where they are," Brock wrote. "I wonder if those surveyed would answer the same way if the question explained that in order to do that, they might have to delay their retirement by three, five, seven or 10 years and have much less discretionary income than if they moved to a less expensive place?"

Healthcare costs are a major worry for retirees, understandably. And many who end up needing a nursing home will probably end up having it paid by Medicaid.

But to put the healthcare demon in context: According to federal government data, average annual healthcare costs for those over 65 are currently less than $8,000 a year per person. You can't retire on nothing - but you can probably retire on less than you think.

Finally, few seem to understand how much money they will actually have. Forget stuff like the so-called 4% rule, which says you should calculate on withdrawing 4% of your savings in the first year and then raising it for inflation. It's hopelessly conservative.

To run some numbers, a good place to start is by looking at immediate annuities, which are insurance products that turn a sum of money into a lifetime income stream. Annuities squeeze more income out of retirement savings than anything else, because the people who die young subsidize those who live a long time.

Right now, a woman of 65 could buy an annuity that will pay her an annual income, for life, equal to 7.6% of her savings balance. In other words, for each $100,000, she'd get a lifetime income of $7,600 a year, guaranteed. If she wants a cushion against inflation (probably sensible), she can buy an annuity which raises its payouts by, say, 3% every year, and right now the initial payout would be 5.8% of her balance.

Or, to put it another way, a woman of 65 with $1.2 million saved could secure a guaranteed lifetime income of $91,000 a year - or $70,000 in the first year, with a 3% rise in every year that follows.

Men get slightly more, because they typically die younger. The older you are when you buy the annuity, the bigger the payout.

Annuities have downsides, because nothing is free. Your money is then locked up in the annuity. You cannot access the capital. And when you die, typically, it's gone - there's nothing for your heirs. But are you worried about retirement, or about leaving a legacy?

And this is on top of Social Security. The average Social Security retirement benefit is currently $25,000 a year. I do not believe these benefits will be cut for lower- or middle-income retirees, because any politician who voted for that would be committing political suicide. I think a compromise to balance the system will probably cut or cap benefits only for higher earners, while increasing some taxes. (I could be wrong, of course.)

And many retirees shoot themselves in the foot by taking Social Security early. If you start claiming at 62, your monthly checks will be barely half (56%) of the checks you'd get if you waited until 70. Even when financial advisers and analysts disagree about other things, they are pretty much unanimous on this: For most of us, almost anything we can do to delay the start of Social Security to age 70 will dramatically help our retirement finances.

None of this means retirement isn't a problem or a worry. It is. It is especially dire in the U.S. among the have-nots. Few of us are safe from terrible luck or a disaster. Few are safe from the costs of poor choices, either, although those we can control. If this panic causes people to save more, and invest more sensibly, that's all to the good.

The bad news is that freaking out - silently or otherwise - won't solve the problem. The good news is that you have much more influence over the outcome than you probably realize.

-Brett Arends

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07-18-26 1122ET