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Do People Understand Their Retirement Preparedness?

Last update on: Mar 14 2020
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This study says that fewer than 60% of households have a realistic idea about how well they are prepared for retirement. Perhaps more importantly, about 20% think they are well-prepare for retirement when they really aren’t.

The real danger in terms of misperceptions is being in the “not worried enough” group. The key drivers here are having a defined contribution plan and being in the high-income group (see Figure 3). As noted, households with a 401(k) may suffer from “wealth illusion,” not recognizing how little income can be derived from their defined contribution balances. In addition, high-income households may not recognize how much wealth accumulation is required to maintain their standard of living. The 19 percent of households that do not recognize that they are at risk are unlikely to undertake remedial action.

 

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