Are You Kidding Yourself About Retirement?

Last Updated Mar 4, 2011 8:43 AM EST

According to a recent study from the Society of Actuaries, most people aren't planning far enough ahead when it comes to their retirement. And I suspect a sizable proportion of those who say they are may be kidding themselves. Here are some key findings:
  • Only five percent of pre-retirees have a planning horizon that takes them to or beyond their life expectancy.
  • Just 13 percent of pre-retirees and seven percent of retirees look 20 years or more into the future when making important financial decisions. Yet there's a very good chance that people who retire at age 65 will live 20 or more years.
  • Seventy-two percent of pre-retirees are calculating the effects of inflation on their retirement planning -- that's good news for them. But only fifty-five percent of retirees are planning for inflation -- that's not so good news. And I'm also worried about a "say-do" gap -- that is, many people say they are planning for inflation because that's the smart thing to say in a telephone survey, but they're really not taking the right steps to protect themselves against inflation.
  • Sixty-eight percent of retirees create a plan to manage their money and how to spend it each year so they don't outlive their finances. While I'm encouraged to hear this, I'm concerned about the remaining thirty-two percent of retirees who don't have such a plan -- they'll most likely run out of money during their lifetime. And here I'm also worried about the "say-do" gap mentioned above.
This study reinforces some common themes you'll often read in my posts:
  • It's critical that you estimate your life expectancy, and then make plans in case you live well beyond that time. You can find effective online life expectancy calculators at or
  • Make sure you have enough money to last for the rest of your life, even if you take inflation into account.
  • If you do these steps and learn that you don't have enough money, you're not ready to retire! You'll need to keep working. But that might not be such a bad idea, as evidence is mounting that working might keep you sharper in your retirement years and help extend your lifespan.
Don't make the mistake of retiring while it's still possible for you to work, and then run out of money in your seventies or eighties, when it's much harder to return to work. By planning ahead, your rest-of-life will be much better!

P.S. By the way, I participated in the development of the study quoted in this post, as part of my ongoing volunteer work to help Americans grapple with the issues of an aging society.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.