Cost of Living Surprise

Many retirees say they were taken off guard by the expenses they have encountered in retirement, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index poll. Thirty-seven percent said health care costs are higher than they had anticipated; 27% point to everyday living expenses and 26% to taxes, for their unexpected cost.

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, having scores of 155 and 134, respectively, in the first quarter of this year.

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 yet to think about it. Twenty percent have also calculated how much income their retirement accounts will generate; 33% have estimated it; and 47% have done neither. Eleven percent have tried to figure out how much in taxes they will pay on their retirement income, 22% have estimated it, and 67% have done neither. Half of those who have calculated retirement costs are confident about the future.