Retirees Say Life Is More Expensive Than They Had Imagined

Many retirees say they are surprised by the expenses they have been faced with in retirement, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index poll. Thirty-seven percent said that health care costs are higher than they had anticipated, 27% point to everyday living expenses, and 26% cite taxes.

The average age at which people retire is 62, and 22% of retirees said they retired earlier than they had hoped. Women are slightly less likely to say this (19%), but evidently more men (27%) end up retiring earlier than they had planned. Forty-five percent of retirees started taking Social Security before they reached full retirement age, decreasing their monthly premiums for life.

“Life events happen, and people don’t always get to choose when they retire, which is why it’s important to have a well thought-out plan that maps out different retirement age scenarios and projected costs in retirement,” says Joe Ready, head of Wells Fargo Institutional Retirement and Trust. “This will help people saving for retirement make the most informed decisions possible.”

The poll also found that retirees are more optimistic than non retirees, with scores of 155 and 134, respectively in the first quarter.

Preparing for retirement

Among non-retirees, only 20% have calculated how much they will need in retirement. Another 32% have estimated it, and 48% are unsure or have not thought about it. Again, 20% have calculated how much income their retirement accounts will generate, 33% have estimated it, and 47% haven’t done either. Eleven percent have tried to figure out how many taxes they will pay on their retirement income, 22% have estimated it, and 67% have done neither.

Among those who have calculated how much they will need and/or how much retirement income their balances will generate, roughly half are confident they will be able to maintain their preferred lifestyle in retirement, whereas only 20% of those who haven’t done any calculations say the same.

Ninety-two percent of non-retirees who invest in a 401(k) plan are satisfied with their plan. Seventy percent would like advice on how to optimize Social Security in retirement, 62% would like advice on how to develop a retirement income plan, and 58% would like target-date funds customized to the exact year in which they plan to retire.

Forty-four percent would like advice based on all of their assets. Forty-four would like their investments automatically rebalanced each year to match their target-date allocation, and 41% would like advice on how to allocate their 401(k) assets.

“As the 401(k) plan is the most common way for people to save and invest for retirement, it makes sense that people would like to access more extensive retirement planning features, such as advice that factors all of their assets into their retirement income estimates and asset allocation strategy,” Ready says. “That’s the next step in the retirement industry.”

The Wells Fargo/Gallup poll was conducted by telephone among 1,321 investors in February.