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5 Biggest Retirement Planning Regrets of Older Workers, Retirees

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There’s a good reason why April has been designated Financial Literacy Month. It’s an opportunity for Americans to bone up on basic financial concepts that affect their daily lives and on the fundamentals of retirement planning.

Survey results released Friday by the Insured Retirement Institute shine a bright light on the extent of what Americans need to learn. The research was carried out online in March 2021 among 990 Americans aged 40 to 73.

In terms of retirement planning, half of workers 40 and older reported that they have less than $50,000 saved. A quarter said they have no savings at all, rising to a third of workers 62 to 66. 

With 57% of respondents reporting that they are saving less than 10% of their income, it’s not surprising that only 44% thought they would have enough income throughout retirement.

Given that Americans are not saving enough, or are not saving at all, the survey found that many have aggressive retirement expectations that are misaligned with their current income.

Take the 62% of workers who currently earn between $30,000 and $75,000 a year and expect annual retirement of more than $45,000. IRI noted that they may receive a Social Security benefit of only $25,000, leaving a $20,000 gap they will have to fill using retirement savings or income from another source.

Perhaps these workers are not doing the math, IRI said. The survey found that just 41% of respondents had tried to calculate the amount of money they would need in retirement.

Despite not calculating savings needs and having unrealistic income expectations, 30% of workers surveyed said they plan to retire before age 65 and another 16% at 65. However, 82% of survey respondents are 61 or younger, and not eligible for full Social Security benefits until age 67. 

Budgeting and Contingency Planning

Add to Americans’ inflated income expectations the survey finding that 70% of workers expect that they will not only have adequate income for basic expenses during retirement, but will also have discretionary income for travel and leisure activities. 

IRI said it’s highly unlikely that more than half of workers will be able to manage on Social Security, particularly if they retire before full retirement age as so many plan to do.

Survey participants may also be unrealistic in their contingency plans if they exhaust savings.

Sixty-two percent believe they can downsize and get by on Social Security if they exhaust their savings during retirement. Thirty-eight percent said they plan to return to work if they run out of money during retirement.

There are a few problems with these scenarios, IRI pointed out. Bureau of Labor Statistics data show that average annual household expenditures of approximately $53,000 for those 65 to 74, close to the maximum Social Security benefit for a married couple. 

Moreover, Social Security will pay only 78% of projected benefits starting in the mid-2030s if the shortfall in the system isn’t addressed.

Four in 10 respondents believe that Medicare will cover their health care needs, ignoring the fact that they may still face significant out-of-pocket costs for medical care. Not only that, Medicare does not cover long-term care.

As for returning to work, that would likely be necessary many years into retirement as money runs out. But many people in those straits may not possess either the marketable skills or good health necessary to return to work.

See the gallery for five things older workers and retirees regret not having done in preparation for retirement, with the percentage of respondents in each age group that selected this answer.