The rich got it wrong.
Despite a general sense of confidence in their financial readiness for retirement, affluent Americans might be overlooking critical tenets of retirement planning, according to a new Schwab survey
The company finds more than eight in 10 investors say they have a retirement plan in place, and 80% of these respondents say they are confident about their financial readiness for retirement.
However, when it comes to estimating how much money they’ll need once they actually retire, respondents say they’ll need on average around $66,000 in income annually, far lower than their current average income of about $115,000.
The survey also finds that, on average, respondents plan to work until they are 67 years old and expect to live to the age of 86, suggesting that they anticipate living off their retirement savings for less than 20 years. When asked directly how many years they anticipate living off of their savings in retirement, people say 21 years, on average.
Retirement Confidence High
Although there appears to be room for improvement in how realistically people are planning for their financial needs in retirement, the story isn’t all bad, Schwab notes. Thirty-three percent of people feel they are completely prepared for retirement, and another 51% feel at least moderately prepared.
Even people who have a financial plan in place would be well-served to give it a second look to ensure they are on track to meet their retirement goals.
People’s sense of retirement readiness seems to provide flexibility in terms of whether or not they will continue working to drive additional income once they retire. Thirty-nine percent of people surveyed say they do not plan to work at all in retirement, and 46% say they might work part time even though they expect to have enough money to live without working. Just 10% think they will have to work at least part time to make ends meet.
When asked how their confidence level has changed since last year, 23% feel more optimistic about being prepared for retirement, while 24% are less optimistic, and roughly half (52%) haven’t changed their perspective. Survey respondents did express some financial worries when it comes to retirement planning. More than half (53%) say their primary concern is incurring unexpected expenses in retirement, such as medical costs.
Regional highlights from the survey include:
- Nearly half (47%) of Los Angeles residents surveyed say they didn’t plan to work at all in their retirement years, compared with only 30% of Washington, D.C., residents.
- More than half (52%) of Philadelphia residents say they’re currently working with a professional advisor on their retirement planning, compared with 40% of Bostonians.
- Washington, D.C., residents are most likely to relocate in retirement (36%), while San Franciscans are least likely to move once they retire (17%).