Some respondents expressing confidence may be reluctant to say they are doing poorly and just adjust to their financial situation, whatever it is. Image: Eviart/Shutterstock.com
Recent positive signs on retirement security may be misleading because of financial boosts that may not last, an analysis has said, adding that there is evidence “that people are putting on a good face when asked about their well-being.”
A posting by the Center for Retirement Research notes that its most recent “retirement risk index”—using data on consumer finances from the Federal Reserve Board—showed that 39 percent of households age 55-64 are at risk of not being able to maintain their standard of living in retirement.
While that is the lowest level in 20 years, it said, the improvement from the range of just above or below 50 percent for the last 15 years reflects recent positives including “rapidly rising home prices, new savings during the pandemic, and strong stock market gains. As some of these extraordinary factors fade, the index will most likely return to fluctuating between 40 percent and 50 percent,” it said.
Only half of households in that age range have IRA or 401(k)-type savings—such as the federal TSP—and of those who do, the value of the accounts is highly concentrated in those in the highest and second-highest of five levels of income, it said.
“Despite the evidence to the contrary, when older households are asked about how they are faring, the overwhelming majority – 80 percent – say they have enough money to be doing okay or living comfortably. Some interpret the high satisfaction levels as evidence that retirement savings are adequate,” it said.
However, they may be “reluctant to say they are doing poorly and just adjust to their financial situation, whatever it is,” it said. One indicator, it said, is that when asked about their biggest regrets, “not saving more” and “not working longer” were the top two among retirees—just above half for the former and just above a third for the latter.
“The bottom line here is that all the objective evidence indicates that between 40 and 50 percent are not saving enough and, when the question is put to retirees in a non-threatening fashion, about half admit they wished they had saved more. So, yes, under saving for retirement is a serious issue,” it said.
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