Data and Research

Individuals Need a Better Idea of Retirement Expenses

Research indicates consumers who conduct retirement planning activities or have a formal written retirement plan prior to retirement have a greater likelihood that actual expenses resemble anticipated expenses.

By Rebecca Moore editors@strategic-i.com | October 16, 2017
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Twenty-six percent of retirees said their basic living expenses in retirement were higher than they expected prior to retiring, according to a study by LIMRA Secure Retirement Institute. 

Another four in 10 retirees underestimated health care and long-term care costs. On average, two-thirds of retirees’ expenditures are spent on basic living expenses and health care and long-term care costs.

“Mismatches between spending expectations and experiences are strongly associated with retirees’ confidence levels,” says Matthew Drinkwater, PhD., assistant vice president, LIMRA Secure Retirement Institute.

Six in 10 retirees who said their basic living expenses were significantly higher than they expected did not feel confident they would be able to live their desired retirement lifestyle. For those who encountered significantly higher than expected health care and long-term care costs, nearly one-third (32%) said they were not confident they would be able to live their desired retirement lifestyle.

The study found women are 50% more likely than men to say that their basic living expenses are somewhat or significantly higher than they expected before they retired. (30% versus 20%, respectively).  Women are also slightly more likely to experience higher than expected health and long-term care-related expenses than men are (43% vs. 39%). Among retirees who faced unexpectedly higher basic living costs, women express lower levels of confidence that their savings and investments won’t run out if they live to be 90 (36% of women vs. 49% of men).

NEXT: Cutting Back on Discretionary Spending Not the Answer