Retirement savings for older workers falling short

The vast majority of older American workers are not prepared for retirement and they know it, but many still have high expectations for how their golden years will be spent according to a new study.

The Insured Retirement Institute (IRI) conducted a survey earlier this year of nearly 1,000 part-time and full-time employees ages 40 to 73, and found that 51% of them had less than $50,0000 saved for retirement, and 56% of respondents admit that they do not believe they will be prepared financially to sustain themselves for the rest of their lives after they stop working. Despite that, one third believe they will retire before 65.

IRI also found that 58% of older workers believe they will need to bring in $55,000 or more annually in their retirement, and 38% expect incomes of $75,000 or more. But the vast majority are not on track to get there.

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While roughly three-quarters of older workers are currently saving, roughly one quarter has less than $250,000 socked away and only one in five have saved over $500,000. In the oldest age cohorts studied, one third of workers ages 62 to 66 have zero in retirement savings and roughly 20% of 63- to 73-year-old workers have nothing.

Regardless, 70% of workers believe they will have enough money to not only cover basic expenses but enjoy at least some travel or leisure activities in their retirement, which IRI referred to as a problem of "champagne budgets" and "a further disconnect between savings and reality."

IRI's analysis speculated that one reason for the disparity between older workers' progress in saving and their expectations for how it might turn out could be because folks aren't doing the math. Only four in 10 workers have even attempted to figure out how much they'll need to fund their retirements, the data show.

More than 60% of respondents believe that if they exhaust their savings in retirement they'll be able to downsize and live out their days on Social Security income alone, but IRI warns that will likely not be the case for the majority of people who are relying on such income for the long haul.

"Many workers with savings believe they will not need to use their savings to cover their basic living expenses, perhaps believing that Social Security benefits alone will be sufficient," the report stated. "It is very unlikely that more than one-half of workers will be able to manage on Social Security, particularly if they retire before full retirement age as so many plan to do."