People ages 55 and up expect to need 13% more income to live comfortably in retirement than retirees actually receive, according to Schroder’s “Global Investor Study: Saving for a Comfortable Retirement,” based on a survey of 22,000 people in 30 countries. In the U.S., pre-retirees think they will need 74% of their income to live comfortably in retirement, but retirees actually receive 58%, a difference of 16 percentage points.
However, the cost of living in retirement takes up more income than expected. In the U.S., pre-retirees expect they will spend 32% of their income on living costs, while retirees actually spend 54%.
The majority of retirees consider their income to be sufficient (92% in the U.S.), but most could actually do with more (44% of that total say they could do with more income). Upon retirement, people allocated more of their financial resources to investments than pre-retirees expect to. In the U.S., pre-retirees expect to invest an average of 8% of their portfolio in retirement, but once retired, they invest 18%.
Expectations for financial allocation at retirement matures as people approach retirement. For example, Millennials expect to allocate 23% of their retirement savings to their retirement income, and Baby Boomers, 38%. In reality, retirees allocate 36% on average.
Globally, people feel they should be saving 2% more of their income for retirement. In the U.S., people are saving an average of 15% of their income for retirement, but they think they should be saving 16%. The level of investment knowledge people think they have correlates with retirement expectations and behaviors. For instance, those who think they are financially savvy have a smaller gap between what they save and what they think they will need.
People’s top two sources of information when making decisions about investments for retirement are their own research from independent sources and insight from advisers. In the U.S., 8% are doing their own research and 8% are relying on advisers.
Research Plus Ltd. conducted the online survey for Schroders last March and April. The full report can be downloaded here.