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May 8, 2021, 3:40 p.m. EDT

Retirees are overly optimistic about their financial future

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Kerry Hannon

As Yogi Berra would say: “It’s déjà vu all over again.”

The Employee Benefit Research Institute (EBRI ) Retirement Confidence Survey , the nonpartisan group’s 31 annual report, is hot off the presses. And once again, the findings are clear. Americans love a good pair of rose-colored glasses.

“Workers envision a transition to retirement that is misaligned with retirees’ realities,” according to the researchers.

Read: Not sure where to live in retirement? Try our tool, your ideal place may surprise you

Nearly half of retirees retire earlier than they expected —most often because they felt they could afford to, because of a health problem or disability, or because of changes within their organization.

Half of workers expect to gradually transition to retirement. That said, only 19% of retirees report having a stepped down transition, while 73% say their retirement was a full-time stop.

Read: Will people continue working from home?

Consistent with prior years, the median retirement age among retirees is 62 years old, while workers’ median expected retirement age is 65. (And if you ask me, given longer life spans and unknown medical bills on the horizon for this generation, that is a foolhardy age to step away, if you can possibly eke out more earning years.)

Sigh.

Meantime, the RCS continues to show that workers expect to work in retirement, which is drastically different than the experience retirees report. Three-quarters of workers expect to work for pay in retirement compared to just 3 in 10 retirees who report doing so.

Nearly 7 in 10 workers expect working for pay to be a source of retirement income —68% expect this to be at least a minor source of income in retirement, compared with 23% of retirees who report this as an actual source of retirement income.

And to me that’s scary.

Here’s why: The EBRI survey found among workers who provided the value of their savings and investments outside of the value of their home and any defined benefit plan assets, 21% have less than $10,000. However, the savings and investments between those with and without a retirement plan (defined contribution plan, individual retirement account (IRA), or defined benefit plan) are starkly different. Sixty-five percent of those without a retirement plan have less than $10,000 in savings.

And here’s the icing on this fantasy vs. reality scenario. In the EBRI survey, conducted in January 2021 with 3,017 Americans 25 and older (1,507 workers/1,510 retirees), 8 in 10 retirees are confident they will have enough to live comfortably in retirement, including 1 in 3 who are very confident. Seven in 10 workers are confident in having enough money to live comfortably in retirement.

I really am an optimistic person, but for years now I have been worried about the prospect of elder poverty sweeping the boomer generation in the last decades of our lives and a social safety net that is simply unable and unprepared to lend some help.

Read: Can I afford to retire?

It’s already happening. I spend lots of my time reaching out to help people understand the importance of saving for retirement and keeping skill sets relevant to stay on the job in some fashion for as long as they can. It’s non-negotiable.

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