The Retirement Reality Gap

Senior couple calculating their monthly finances at home.
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By Tom Sightings

The new post-Great Recession economy has taken its toll on retirees, as well as those of us looking forward to retirement in the near future. Unfortunately, there's something of a reality gap between what today's workers think about retirement and what actually happens in retirement. Here's a look at the perceptions and the realities.

Today, many people plan to delay retirement. According to a 2013 survey by the Employee Benefit Research Institute of 1,000 individuals age 25 and older, some 22 percent of workers said the age at which they expect to retire has increased. Respondents cited a poor economy and the inability to afford retirement as their main reasons for the delay. Almost 10 percent of workers said they'll never retire. At the same time, the number of people expecting to retire early, before age 65, is just about half of what it was 20 years ago.

The gap: People retire sooner than they expect. Almost half of retirees surveyed reported that they retired sooner than they had planned. Those who retired early cited a number of reasons. A few retired because they could afford it. But many more cited a layoff, health issue or disability.

Baby boomers feel younger than they really are. According to a 2012 AARP-sponsored poll of 1,852 registered voters, including 1,331 age 50 and older, health and longevity are not topics that often come up in conversation among baby boomers. Only about half of those nearing retirement said they had discussed the issues of poor health, disability and death with their spouse or doctor. %VIRTUAL-article-sponsoredlinks%And according to a 2009 Pew Research Center survey of nearly 3,000 adults, boomers felt at least 10 years younger than their actual age. They peg "old age" at somewhere above 75.

The gap: The biggest reason for early retirement is an unexpected health issue. According to the EBRI survey, 55 percent of those who retired earlier than planned say they did so because of a health problem. An unforeseen illness can disrupt your retirement dreams and cause other complications. For example, if you think you'll work until age 75, you might not consider things like long-term health insurance. According to the U.S. Department of Health and Human Services, someone turning 65 today has almost a 70 percent chance of needing long-term care services.

Today's workers plan to work part time in retirement. Almost three quarters of people now holding a job said they expect to work after they retire to supplement their income, according to the EBRI survey. Over half admitted that they are counting on income from a part-time job to be a significant source of income in their later years.

The gap: Only about 25 percent of retirees report that they are actually working in retirement. The reality is that many retirees want to keep working part time for their old employer, but their old employer doesn't need their services. Or they want to find a consulting job, but discover that their experience is not relevant in the current marketplace. Many find that the majority of help-wanted opportunities are minimum-wage jobs in retail or hospitality, and they decide not to work after all. If you do want to work part time in retirement, the best time to find the job is before you retire.

Workers are aware that they are left largely to their own devices to save for retirement. Multiple surveys have shown that workers have lost faith in Social Security, know that defined-benefit retirement plans are on the wane and that they should take advantage of various retirement accounts such as 401(k) plans and individual retirement accounts. Major financial firms including Fidelity and Aon/Hewitt recommend saving up to 10 times your annual income, which along with Social Security should allow you to replace approximately 85 percent of your preretirement income.

The gap: People fall far short of their savings targets. According to a 2013 study by the National Institute on Retirement Security, 45 percent of working-age households do not own any retirement account assets. And two-thirds of older households ages 55 to 64 have retirement savings of less than one time their annual income, which is far below what they need to maintain their standard of living. A little over a third of retirees say a pension provides a significant amount of their income. Still, some 70 percent of Americans credit Social Security for their main source of income, according to the EBRI survey.

The solution. There is often a major difference between what people expect in retirement and what they actually get. As you go about planning your own retirement, pay attention to the gap -- the one that can be caused by a layoff, unexpected health issue or unfamiliar job market. And make plans to close that gap.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.

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The Retirement Reality Gap

This advice applies to adults and kids alike. Plan out your shopping list before you head to the grocery store so you’re not tempted by impulse buys, and let any children along for the ride know that you plan on sticking with that list. Small expenditures add up to big money, so try to avoid giving in to any last-minute requests.

If your children continue to insist that you purchase their requested items, then ask them to bring their own piggy bank money. Remind your children they are only allowed to pick something they can afford. It's good practice for grown-up budgeting.

You might not have 20 hours a week to scour multiple publications for the best deals, but if you focus on searching for online coupons, you'll end up saving just as much. Search online for products with the word "coupon" afterward. For instance, if you're looking for Cascade dish soap, search for "Cascade dish soap coupons."

To make sure that you don't waste money on impulse buys, schedule your shopping around paydays. The day or day after you get paid should be your shopping day. Before you go shopping, make a list and make sure it has everything you'll need until the next shopping day on it. Now make a commitment to yourself that you will make what you're going to purchase last until the next shopping day.
Stocking your freezer with frozen meals can help you save money on lunch, since they cost just about $5 each. It can even be a healthier option because they help you practice portion control. Just make sure you're purchasing meals that have no preservatives, and watch out for sodium levels.
Don't waste your time making a sack lunch every day. Instead, prepare a week's worth of lunches on Sunday, and your body will thank you for the extra 10 to 30 minutes of sleep you'll gain each night. If you cook one big meal on Sunday, make sure it's easy to change up throughout the week. Chicken, rice and vegetables all cook quickly and taste great with different sauces and cheeses.
Most families throw away so much food on a weekly basis. A better idea is to turn your dinner leftovers into a lunchtime feast. Apps like BigOven help you use your leftovers to make yummy, new dishes. All you have to do is enter the ingredients you have, and the app will show you different recipe options for your leftovers. You'll save money using food that would have been thrown out.

If you know you have $400 to spend per month on your food budget, that's roughly $100 a week. Whether you shop once or twice per week or use cash or credit doesn't matter as long as you stay within your spending limits. Just be sure to only spend the amount you allotted per week.

Keep your shopping list in a set location so all members of the household can access it. Write estimated prices of the items you are going to buy next to each item on the checklist. It can serve a dual purpose as a price book you can use to guess how much you will spend.
If you've ordered from the kids menu at a restaurant recently, then you know how big the meals are – they're almost as big as meals for adults, and they can cost up to $10 each. If you have multiple children, an easy way to cut down on this expense is to have them share a meal. Not only does this lower the cost of feeding everyone, but it also cuts down on food waste.
Most stores are open late, and without the distraction of announcements, people and maybe even your kids, you can have your own Zen moment. When you are clearheaded, you're more likely to zone in on what you really need and leave out what you really don't. Plus, it's easier to give the cashier coupons without causing any delays for the people in line behind you.

We are a society consumed by all sorts of apps, but if you want to grocery shop, save money and still be lazy, let Favado, an app created by, do the work for you. The app will tell you about items on sale from different stores, and if there is a store coupon or manufacturer coupon, it will also let you know that too. (Of course, you can just use it to scan the weekly ads to keep things simple.) And if you're already glued to your smartphone, it's easy to incorporate into your shopping routine.

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