Financial Needs in Retirement: Exact Calculations Sparse

By John Iekel • April 18, 2018 • 0 Comments
A majority of U.S. investors have not calculated how much income they will need while they are retired and how much their retirement accounts will generate for them, says a recent study.

According to the Wells Fargo/Gallup Investor and Retirement Optimism Index survey, most investors who have not yet retired have not performed calculations regarding the revenue they will need, the income they will earn, the expenses they are likely to incur and the taxes they would owe during retirement. And that holds regardless of nearness to retirement.

Almost half of employees younger than age 40 have not thought much about how much income they will need each year during retirement, the study found. And not many more of their older counterparts have — almost 40% of those age 40 and older also have not done so. Even fewer have calculated what their needs would be: a whopping 83% of those under age 40, 80% of those ages 40-59, and 74% of those age 60 and older did not.

Those with retirement accounts are unequally imprecise how much those accounts will generate for them. According to the study, 85% of those younger than 40, 80% of those ages 40-59 and 71% of those age 60 and older have not calculated that. And almost half of young investors, 36% of those age 40-59, and 37% of those age 60 or older have not given it much thought.

The findings are similar regarding other financial considerations. The study found that 51% of investors who have not yet retired have given little or no thought to the strategy they will use to draw income from their retirement savings accounts; 55% have given little or no thought to how they will pay for long-term care or assisted living and 58% have devoted that level of consideration to the taxes they will pay while they are retired. It did also find, however, that thought about these factors increased in frequency by age category, and that at least half of those age 60 or older had thought about each.

The researchers note that more investors who have not yet retired thought about how they would spend their leisure time and where they would live than how they would pay for it all. And they warn that such individuals may rely to their detriment on the assumption that they can simply work longer than they initially may have planned and that unforeseen circumstances could arise that could thwart such a plan.