(Un) Realistic Expectations

Considering the ‘Retirement Confidence’ Survey

by Nevin Adams

Mr. Adams is affiliated with the Employee Benefit Research Institute (EBRI)
Reprinted with permission

This past weekend I joined the throngs of humanity that went to the theaters to see Iron Man 3. I grew up reading Marvel Comics, and, for the very most part, seeing those characters brought to life on the big screen has been a real treat.

I had been curious about the new Iron Man movie for some time, but wasn’t sure if it could live up to expectations based on the prior films. It’s hard to escape the endless promotions for these summer blockbusters, but I made a conscious effort to do so, and even avoided reading the reviews of the film until after I had had a chance to see it for myself. That decision involved some financial “risk” as anyone who has taken a family to the theater recently can attest.

There have, however, been disappointments along the way―sometimes the acting was bad, sometimes the storyline was (unintentionally) laughable, and sometimes the movie fell short of what I had anticipated simply because my expectations were set so high.

Over the years, the Retirement Confidence Survey¹ has helped uncover a number of interesting and intriguing perspectives about retirement, real and imagined―and no small number of what would appear to be unrealistic expectations about retirement: expectations around how long individuals think they will be able to work, for example, or that they will be able to work for pay after retirement. Additionally, there have been indications that more individuals expect to receive a pension than would be suggested by the data regarding how many American workers are actually covered by such programs.

The RCS has found that men and women have similar expectations for the age at which they plan to retire, and that, despite the fact that women tend to live longer and face higher health care expenses in retirement due to their greater longevity, women were statistically as likely as men to think they will need to accumulate less than $250,000 for retirement. More recently, an EBRI analysis indicated that married couple respondents to the RCS were citing retirement savings targets that were better suited for single individuals.²

It’s all about confidence

...despite the fact that women tend to live longer and face higher health care expenses in retirement due to their greater longevity, women were statistically as likely as men to think they will need to accumulate less than $250,000 for retirement

Much of the focus around the release of the Retirement Confidence Survey was, as one might expect, on retirement confidence―an individual’s sense of their confidence in having enough money to live comfortably throughout retirement. And, despite some of the optimistic assumptions cited above, that confidence was mired at historic lows for the RCS, which has tracked those sentiments for nearly a quarter-century.

Avoiding the incessant summer blockbuster pre-release promotions and commercials takes some effort. In hindsight, going to see the movie with no real expectations beyond that set by prior films was a good decision, certainly from the standpoint of my enjoyment of the newest version.

Admittedly, planning for that financially comfortable retirement can appear a daunting task, one readily shunted aside in favor of more current, and what seem to be more pressing tasks. Despite the ready availability of free planning tools, such as the Ballpark E$timate,³ the RCS indicates that many have never made even a single attempt―have not even guessed―at how much they might need for retirement. Yet EBRI analysis indicates that those who have taken the time to do so set better targets than those who haven’t.

Ultimately, not having established a set of expectations can make for a pleasant surprise at the cinema―but it’s likely to result in a surprise of a completely different sort in retirement.


¹ The 2013 Retirement Confidence Survey is available online here.

² See “A Little Help: The Impact of On-line Calculators and Financial Advisors on Setting Adequate Retirement-Savings Targets: Evidence from the 2013 Retirement Confidence Survey,” online here.

³ The BallparkE$timate® is available online here. Organizations interested in building/reinforcing a workplace savings campaign can find a variety of free resources there, courtesy of the American Savings Education Council (ASEC). Choose to Save® is sponsored by the nonprofit, nonpartisan Employee Benefit Research Institute Education and Research Fund (EBRI-ERF) and one of its programs, the American Savings Education Council (ASEC). The website and materials development have been underwritten through generous grants and additional support from EBRI Members and ASEC Partner institutions.