By: Phil Kernen

Retirement planning is hard. It requires giving thought to a host of questions and determining assumptions whose impact may not materialize for a decade or more, which provides a lot of room for error. The associated complexity explains why most of us tend to put off such work for another day. But does that long-term time horizon give us a false sense of confidence and put retirement success at risk?

Setting expectations is a critical component to success in any number of endeavors. It applies to your job, for instance. You can only determine success when you measure your work against expectations set by your boss. It applies to personal activities too. Set expectations for that new blockbuster too high, and you will likely be disappointed. 

Conversely, haven’t we all had that experience for which expectations were low, only to find ourselves coming away with a memory to last a lifetime? It is the same with retirement planning. The more we can increase the odds of exceeding our expectations, the better our experience will be. And evidence suggests we are doing ourselves a disservice.  

Each year the Employee Benefit Research Institute conducts a survey to measure worker and retiree confidence about retirement. Because it includes responses from those on both sides of retirement, we can glimpse how well some hopes are likely to be met. Key findings from the last survey point out how far our expectations can be from the reality we are likely to experience.  

  • Half of workers expect to retire at age 65 or later, differing from the majority of retirees who retired earlier at an average age of 62.
  • The idea of early retirement early is appealing. Who among us doesn’t dream about spending our time as we wish sooner than society considers normal? The caveat is that we want to do so on our terms and timing, which doesn’t always happen. 47% of retirees reported having retired earlier than planned. While 38% report retiring early because they could afford it, even more workers stopped working for other reasons.
  • 4 in 10 workers expect to transition into retirement gradually, earning income to help fund retirement spending. However, only 17% of retirees report doing so. 7 in 10 retirements said they had a hard stop from full-time employment.
  • Most workers continue to expect to engage in some level of work for pay in retirement. The reality is quite different. The percent of workers planning to work for income in retirement stands at 70%, compared to the 27% of retirees who report they have actually worked for pay in retirement.
  • While most workers are confident they knowhow much monthly income will be needed for retirement, only 46% report having tried calculating the required level. Said differently, most of us are approaching retirement as if the pieces will fall into place, a key ingredient in unmet expectations.

Recognizing these expectation gaps can go a long way toward bolstering your retirement success. You may feel you have a mental handle on the facts and figures, but take the time to put them down on paper to see if the math adds up. Consider alternatives if life circumstances put you out of work before you are ready due to reasons outside your control. And consider the reliability of your income sources after retirement with an incredibly skeptical eye towards job-related income. The better you plan, the clearer your expectations, and the greater your chances of retirement success.