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Are Americans overly confident about retirement?

Americans are more optimistic than they’ve been in years about life in retirement. Yet one question remains: Will they have enough money?

According to a new study by the Employee Benefit Research Institute, confidence among U.S. workers has rebounded to pre-recession levels, with more than two-thirds (67%) saying they are very or somewhat confident they’ll be able to live comfortably throughout retirement. And, among those already out of the workforce, 82% are confident they will have enough money to live comfortably in retirement, up sharply from 75% a year ago.

“As the economy and current financial situation for workers and retirees improves, so does confidence,” said Craig Copeland, EBRI senior research associate.

Yet workers’ confidence about retirement living may be unrealistic, given the low share of those who have actually run the numbers on how much money they will need in those years.

Only 42% have done those retirement calculations, the EBRI report found. And fewer than 1 in 3 workers has tried to calculate how much money is needed for medical expenses in retirement. A 65-year-old couple retiring this year could spend $285,000 out of pocket on medical costs through their lifetimes, according to Fidelity Investments.

Researchers for EBRI’s 2019 Retirement Confidence Survey —the longest-running of its kind, which is now in its 29th year — say the discrepancy between retirement confidence and preparation is not new.

“We did see those types of discrepancies between confidence and retirement needs calculations before 2008,” Copeland said. “There is a disconnect.”

Some financial advisors say that disconnect is due in part to workers’ decisions about what to do with their money today, as well as a lack of planning about future finances.

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For many workers, “it’s emotional,” said certified financial planner Ivory Johnson, founder of Delancey Wealth Management in Washington, D.C. “They’re buying things based on their current lifestyle.

“They made a decision to prioritize their current lifestyle over the retirement lifestyle,” he said.

That may explain why another study released today by Fidelity Investments about Americans’ “retirement mindset” finds that while 62% are confident about their current financial health, a majority lack confidence in their retirement future. Only 18% of Americans have created a comprehensive written plan for their retirement, according to the Fidelity report, which also found those who don’t have a plan said they’ve have never thought about it, don’t know where to begin or feel that they are too far behind for it to make a difference.

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About Virgie Powell

Virgie B. Powell writes for Reiterment Planning and Tax Advice sections in AmericaRichest.

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