A new study from Schroders sheds light on why so many Americans and others aren’t saving enough for retirement: They underestimate how much money they’ll actually need.
The survey of 22,000 people in 30 countries — including 1,606 in the U.S. — found that pre-retirees aged 55 and older underestimate the necessary levy of retirement savings by 13 percentage points. They expect to need 76% of their current salary in retirement but have only 63% on average.
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In the U.S. the gap is 16 percentage points — expecting 74% of their current salary to live on but saving only 58%. The gap is narrower in Europe, at nine percentage points, but wider in Asia at 17 percentage points.
In the U.S. and in many other countries, pre-retirees are underestimating their everyday living expenses in retirement. Americans estimate that living expenses will eat up about 32% of their income when in actually it accounts for 54%. Their expectations for health care spending surprisingly is in line with actual spending levels —15% compared to 14%.
Despite these disconnects between saving levels and spending outlays, 92% of U.S. retirees surveyed report that they have sufficient income, though roughly half say they could use a little more. In comparison, 85% of retirees globally report sufficient income, also with about half preferring to have more.