A new survey reveals a major disconnect in perceptions between the expectations of retirement among those who are still working and the experiences of those who have already retired.
The latest data from Gallup’s annual Economy and Personal Finance survey, conducted April 1-21, 2021, show that the vast majority of U.S. retirees report having enough money to live comfortably; in fact, 80% say so today. In contrast, only 53% of non-retirees expect to have enough money to live comfortably when they retire.
Additionally, Gallup found that the economic fallout from the COVID-19 pandemic has done little to alter these views, especially in comparison to the downturn in non-retirees’ expectations following the 2007-2009 recession.
In April 2020, amid widespread business closures and a nearly 15% national unemployment rate, 51% of nonretired Americans said they thought they would have enough money to fund their retirement adequately, which Gallup notes was a drop of six percentage points from the previous year. As such, non-retirees’ expectations remain more pessimistic today than immediately before the pandemic.
However, that same pattern is not seen among retired U.S. adults, as steady, broad majorities reported they were living comfortably despite the economic upheaval of the past two years. Retirees’ reports of their financial situation were also largely unaffected by the Great Recession, the organization further notes.
As background, Gallup notes that since 2002, majorities of retirees ranging between 71% and 83% have said they have enough money to live comfortably. Over the same period, however, far fewer of those not yet retired—from 38% to 59%—have anticipated a similar outcome for themselves. “It is unclear if these differences result from retirees being better prepared financially for retirement than today's non-retirees are, or if non-retirees are overly pessimistic about what their retirement finances will look like,” writes Megan Brennan, Research Consultant at Gallup.
Expectations vs. Reality
Disparities between non-retirees’ expectations and retirees’ actual experiences are also apparent in their descriptions of retirement income sources and retirement ages. “The differences in reliance on income sources between those who are already retired and those who are not yet retired are likely attributable, at least in part, to apprehension about the Social Security system, as well as the rise of 401(k)s accompanied by a decline in work-sponsored pension plans,” Brennan observes.
According to the findings:
- 57% of retired U.S. adults say they rely on Social Security as a major income source, while 38% of non-retirees expect it to be a major source for them.
- 36% of retirees and 19% of non-retirees say a work-sponsored pension plan is or will be a major income source.
- Nearly half (49%) of non-retirees are most likely to say a 401(k) or other retirement savings account will fund their retirement, while only 35% of retirees cite 401(k)s as a major funding source of their retirement.
Non-retirees are also more likely than their retired counterparts to say they plan to rely on several other income sources to at least a minor degree, including other savings accounts, home equity, part-time work, rent and royalties, and inheritance money. Gallup also found that there is less divergence between the two groups in viewing annuities or insurance plans, or individual stock or stock mutual fund investments, as an income source.
Age and Income
Retirement age is another area of ongoing discrepancy between those who are already retired and those who are not retired. Here, Gallup notes that, since 2002, the mean age at which retirees report they stopped working has been modestly lower than the mean age at which non-retirees predict they will retire. The latest results show that the actual mean retirement age for retirees was 62, while the mean expected retirement age for non-retirees is 64.
While noting that it’s unclear why the discrepancies exist, Brennan observes that with the age at which people can receive Social Security benefits higher for retirees today than in the past, many non-retirees may be looking to delay retirement to a later age. “However, it is also possible that non-retirees’ plans will be altered by their employers’ staffing plans, their physical health or job market conditions, forcing them to retire before they ideally would like to,” she further notes.
Also, like past findings, the expectations of retirement among non-retirees differ based on income level—those with higher incomes are most likely to forecast a comfortable retirement for themselves. In the current survey, Gallup also found that there are no meaningful differences by age. In the past, younger non-retired adults have often been more confident than their older counterparts when it comes to their outlook for a comfortable retirement.
