Survey Says: Retirees Wish They'd Saved More. Will You Be in the Same Boat?

In September 2000, the Employee Benefit Research Institute (EBRI) with the Retirement Security Research Center (RSRC) surveyed 2,000 individuals, aged 62 to 75. Of these individuals, 97% reported being retired (80% reported that their spouses were retired). 

According to the study, households fit into the following categories: 

• High annual household income ($80,000 and higher)
• Middle household income ($40,000 to $79,999)
• Low household income (less than $40,000)

The mean amount of current financial assets reported by respondents was $200,000, with a median of $75,000. 

Perhaps the most important takeaway: Most surveyed wished they had saved more money in their earlier working years. 

Takeaway 1: People wish they'd saved more.

Perhaps not surprisingly, most people wished they could have a do-over in the amount they'd saved for retirement at a younger age. A small percentage were happy with the amount they'd saved, but only 18% of those were satisfied. Of the study respondents, 46% reported that they'd saved less than they needed in retirement.

The survey extracted the following retiree profiles: average, comfortable, affluent, struggling and "just getting by."

• Average retirees: Average retirees shared financial assets of $99,000 or less and intermediate levels of income (between $40,000 and $100,000 annually). This group typically drew from a defined benefit pension plan and Social Security. Nearly half had debt, such as credit card debt and car loans. 
• Comfortable retirees: Those reported as "comfortable" showed more in assets compared to the average retirees, between $99,000 and $320,000. Their debt is manageable. These retirees said their retirement savings were sufficient or even above their needs. The comfortable retirees reported a virtually unchanged standard of living since they left work.
• Affluent retirees: Affluent retirees had high levels of financial assets ($320,000 or more) and annual income ($100,000 or more). These typically mortgage-free homeowners had no debt. They typically had access to a wide source of retirement income than the retirees from other groups. They reported not having credit card and auto loan debt. They reported that their standard of living has stayed the same or improved since retirement. 
• Struggling retirees: Struggling retirees had lower financial assets and income. Their assets amounted to less than $99,000 or were equal to $99,000. Their income amounted to less than $40,000 annually. This group tended to rent instead of own their homes and were more likely to have debt such as credit card and medical debt. These retirees reported having a low health status. These individuals rely on Social Security to float them in retirement. They admitted to a reduced standard of living compared to the amount they'd earned during their working years.
• "Just-getting-by" retirees: "Just-getting-by" retirees also reported low levels of financial assets and income but no longer owed money for a mortgage. They owned their homes. They reported zero debt or easily manageable debt and often reported no credit card or medical debt. 

Not surprisingly, the affluent and comfortable retirees reported that they were the most satisfied with their retirement life. In addition, the struggling retirees reported their retirement satisfaction the lowest of all.

What You Can Do Now

A 2017 survey by the Employee Benefit Research Institute suggests that only 41% of workers and/or their spouses have tried to calculate how much they need to save to live comfortably in retirement. 

Now's the time to get going if you haven't already.

Let's go over a quick example of how you can think through your situation. Let's say you and your partner earn $150,000 per year. You've regularly saved 15% of your income for retirement. Let's say you pay $1,500 per month for your mortgage payment but plan to pay it off before you retire. You should be able to live off of $109,500 in retirement: 

• Current annual income: $150,000
• Minus current annual mortgage expense: $18,000
• Minus current annual retirement savings: $22,500
• Rough estimate of the income you’ll need in retirement: $109,500

Take a look at where your regular and variable income will come from. Will you draw from Social Security and pension in terms of regular income? Will you draw from variable income, such as from an employer defined contribution retirement plan, such as a 401(k), 403(b), 427 account? Do you have money from a traditional or Roth IRA stuffed away?

You may want to carefully consider early on how you'll withdraw income from your savings, particularly if you invest money in stock and bond markets. You may want to balance what you've heavily invested in equities with low-risk money market funds, bank savings accounts and CDs.

Takeaway 2: They planned to significantly spend down their assets.

Of the respondents, 43% reported that they planned to spend down all or a significant portion of their assets during their golden years. Instead of growing their assets, a large majority said they had to spend it.

What You Can Do

Loss aversion runs rampant among retirees. Psychologists describe this phenomenon as the more prevalent feeling of pain of anticipated financial loss compared to the happiness of gains. It's no fun at all to have to use your money when you've worked so hard for it. The way to conquer this crushing sensation? 

Make a plan for your wealth. 

Do you want to spend all your wealth in your lifetime? Do you want to preserve your wealth by creating a legacy for your heirs? Once you have a plan, you can check your current savings plan and whether it will realize your goals. Having a plan helps you transition from accumulating to decumulating assets, because expenses don’t disappear. 

If you think you’ll spend less in retirement, you may be mistaken and, unfortunately, undersaving for your goals. 

Takeaway 3: Those least satisfied in retirement have debt.

Those least satisfied with retirement were those with unmanageable or crushing debt, according to the survey. They faced: 

• Lower life expectancy.
• Less ability to spend within their means.
• High retirement costs.
• Lack of alignment between retirement expectations and reality.

What You Can Do Now

People wish they’d saved more as they face potential retirement costs, which includes preparing for the costs of long-term care. Furthermore, it's a good idea to understand the importance of a mortgage-free home in retirement. If you have credit card debt, you should explore your options to eradicate it well before retirement, if possible.

Put simply, it's important to address debt levels well before you approach retirement age. 

Learn from Those Who Are There Now and Prepare

Are you geared toward becoming a comfortable or affluent retiree? If so, you've likely arranged a guaranteed source of retirement income and addressed certain behavioral characteristics (such as carrying debt) that can affect your future.
Also consider one other thing that might not even cross your mind right now: Eighty-one percent of respondents reported that their health and wellness in retirement was more important than anything else. Are you also taking care of your physical wellness? If not, it could cost you in retirement.