Retirement: Reality Vs. Expectations

If you had an opportunity to see into the future, would you take it?

Retirement is a fascinating topic.  One of the most interesting elements about retirement is that it’s a period we think about for years, without knowing what it’s really going to be like.  Only AFTER you’ve retired do you know what the actual experience feels like.  Until then, it’s a future that you can’t truly experience.  That’s where I’m at today; a “near retiree” who’s planning for retirement without really knowing what it will actually be.

Today, we’ll look into the future for those who, like me, are a few years away from retirement.  Perhaps we can learn from those already experiencing retirement, as they look back at what their expectations were when they were in our shoes.  Perhaps we can revise our assumptions, while we still have time to make a difference.

The basis of this post is this article from Bloomberg, which in turn was based on this piece of research from HSBC.  The research is based on surveys of over 18,000 people, in 17 countries, and is the most comprehensive research I’ve read on this topic. If this blog post interests you, I encourage you to also read those root stories on which it is based.

A look at the actual experience of retirement, and how it compares to expectations. Click To Tweet

This article looks at the actual experience of retirement (our opportunity to see the future), and how it compares to earlier expectations from the perspective of those who have already made the transition.

Retirement:  Reality Vs. Expectations – Key Findings


The HSBC study is fascinating, and worth a detailed read.  The Bloomberg article adds some good commentary on the study.  This article attempts to combine the best from both, and summarizes both the initial research and the Bloomberg article into one source for your convenience.

Retirement Costs

retirement spending

As the above chart shows, our reality doesn’t align well with our expectations when it comes to retirement spending.  Every category experienced higher spending than expected, with borrowing and financial supporting others being the two areas that should cause you to rethink your retirement spending projections.

Below, in bullet format, are some of the other key findings from the Executive Summary of the report:

  • 86% of folks with < 5 years to go view retirement positively, while only 68% of retirees feel the same.
  • 64% of folks over 70 are financially supporting others, the highest of any age group.
  • Almost 1 in 7, or 14%, of working age people have not started saving for their retirement.
  • 12% of people in their 50’s have not yet started saving for retirement.
  • 35% of retirees wish they had started saving for retirement at an earlier age.
  • 22% of working age people have never received advice and/or information about retirement.
  • 42% of people in their 60’s and older expect to move into a retirement home.

wished they saved earlier

How Will You Fund Your Retirement?

How to fund retirement

The most concerning disjoint between expectation and reality is the expectation of how much money will be earned after retirement.  While 36% of pre-retirees expect money earned during retirement to be an income source, the reality is much different.  Only 14% of actual retirees report earned income as an actual source of retirement funding.  Also, be cautious in assuming an inheritance will buffer your retirement income needs, as far fewer of those who have actually retired report an inheritance compared to expectations before retirement.  Another area to be careful in your assumptions is downsizing your home.  54% of pre-retirees expect to move into a smaller home for retirement.  While 17% of pre-retirees expect downsizing to help fund retirement, only 10% of retirees report downsizing as an actual source of income in retirement.

Further, as I wrote in Will You Be Forced To Retire Early, 60% of Americans retire earlier than they planned.  Be conservative on assuming how much you can earn later in life and how much you’ll inherit, both are risky assumptions.  Rather, focus on these 7 Strategies To Make Your Money Last Through Retirement, and plan conservatively.

Priorities Shift After Retirement

priorites in retirement

As people age, health becomes increasingly important, with 78% of those age 60+ citing it as one of the most important ares in their life.  Set a goal to begin an exercise program.  Get out and take a walk.  Also, having enough money becomes increasingly important as we age, as does being in control of your finances.

Expect your priorities to change in retirement.  It’s natural, and should be part of your planning process.  Think about things you expect will be important in your future (your health), and take steps now to make them better (exercise).

Approaches To Finances

approaches to finances

The HSBC study identifies 5 different approaches to retirement planning.  Study them for a minute, and self-classify yourself.  Personally, I’m a planner, and categorize myself in the “Strategic Planner” group.  This bodes well for my success in retirement, as this group tends to be better positioned to enjoy a confortable retirement. Think about where you are today, and what you can do to better position yourself for a successful retirement.


4 Steps To Consider In Your Retirement Planning

The study concludes with four recommendations to consider in your pre-retirement planning.  Having read the study in it’s entirety, I’m comfortable re-publishing their recommendations here.  They’re sound recommendations, and I support each of them.

Consider All Of Your Retirement Expenses

While only 20% of pre-retirees expect to have credit card debt after retirement, 40% of actual retirees report credit card debt.  Be realistic when making assumptions about your retirement expenses.  Consider the areas in this report where retirement assumptions have proven to be different than reality, and adjust your assumptions accordingly. Track your actual expenses for a few months, and use it to build your estimated spending in retirement.

Start Saving Earlier For Retirement

Learn from the 35% of retirees who wish they’d started saving at an earlier age.  If you haven’t started saving yet, start saving now.  Scour your monthly spending to find areas where you can cut.  Automate your savings, as I recently told my daughter to do.  If you feel you’re late in getting started, don’t despair.  Stop making excuses, and start now.  Your “retired self” will thank you.

Make Sure You’re Getting Sound Advice

The fact that you’re reading this blog is a good sign.  You’re ahead of the majority of folks planning for retirement, as only 32% of pre-retirees report getting advice from sources including blogs, discussion forums, and other online sources.  Don’t rely exclusively on family for advice, and don’t assume someone else will handle your retirement planning.  This is too important a topic to leave entirely to others.  If you must, hire a financial advisor, but learn enough about the subject before your meeting to insure you can have an educated discussion.  If you’re worried about a friend or family member who isn’t taking retirement planning seriously, forward them a copy of this article, in love.

Be Prepared For Financial Ups & Downs

35% of pre-retirees who have saved for retirement report either having to stop at some point, or facing serious difficulties in continuing to save.  Insure you’re keeping your major life expenses below your income, and be particularly careful when you buy cars and homes.  Keep your retirement savings a high priority throughout your working years, and you’ll be well on your way to….

Achieving A Great Retirement.



  1. Great blog post as alway. It is always surprising to me that 1) people do not start saving for retirement earlier in life 2) that people think they are “different” from he statical norm – I fell onto this perception myself recently as well so no stones here 3) how retirees can overspend in so any areas and not do something different, or maybe that’s just the visual effect of averaging 18,000 people’s responses. Does set me back and cause me to take pause …. Thanks again for the article and insight.

  2. Your article reminds me of a bunch of Yoda sayings.

    Difficult to see. Always in motion is the future.. – Yoda
    Mind what you have learned. Save you it can. – Yoda
    Always pass on what you have learned. – Yoda

    I especially like the last piece of Yoda advice. I wish my dad had been more knowledgeable in retirement planning and had passed on what he had learned. Of course I was probably like my son is now when I start discussing retirement planning, his eyes glaze over and he drifts off in his own world. This is why I will open for him his own IRA accounts this year and link them to his bank account to automate the saving process for him. His wisdom in investing hopefully will follow.

    Great article and thought provoking stuff.

    1. Yoda… my kids love yoda and have no idea who he his… funny.

      From the above, I do think we are comfortably affluent.AM I biased by the sportscar in the picture?

    2. Brandon, I love your connection to Yoda. Especially touching was how you transitioned the humor into a serious point with your Dad. Serious stuff, this, and important that we find relevant ways to pass on the lessons to our children. Ironically, we just opened a Roth IRA for my 21 year old daughter who just got her first “real” job. I’m trying to mentor her, and she is paying some attention, but I’ve found it best to keep it very simple and high level, followed by practical “tactical” action. She’s now opened her Vanguard Roth and a CapitalOne360, and has set up automated monthly transfers. At this stage, that’s perfect, and I’ll teach her more as she progresses. (BTW, I just googled “Yoda quotes”, WOW. May be a topic of a future post!)

  3. We just completed our third month in retirement. It has actually been better than I expected. We spend more time volunteering and supporting non-profit organizations than we planned but we’re doing things we truly enjoy and look forward to doing every day. We’ve been staying within our retirement budget but will probably spend a little more than planned by the end of the year on some home upgrades and vacations. We’ve had more out of town visitors than ever before and look forward to this trend continuing. We will probably get some amount of inheritance but this is not in our retirement plan – it will be a bonus that we hope doesn’t materialize for a long time. The most important part is the time my wife and I get to spend together volunteering, vacationing or just playing cards and going for walks. We are glad that we started saving early, prioritized retirement planning for the last couple decades and focused on the most important things in life – family, friends and our love for each other. It’s our hope that 3 years and even 30 years from now it will still be as wonderful as today.

    1. Bert – great to hear from you, and sincerely happy that your transition into retirement is going well. I look forward to that transition myself, and we’ve started working with some charities in our new retirement home town on weekends. I look forward to keeping in touch as your retirement unfolds. Feel free to submit another guest post any time, your “Red Zone” article was a big hit!

  4. Great post Fritz. I love your research and infographics.

    Tracking expenses has been one of the biggest pre-retirement confidence boosters for us. We see where our money goes and where we could cut back if we absolutely needed to. And It only takes 10-15 minutes a week.

  5. Nice coverage of an interesting topic. “One of the most interesting elements about retirement is that it’s a period we think about for years, without knowing what it’s really going to be like.” Indeed! Of most interest to me was the first graph which illustrates expected vs. actual spending. It doesn’t surprise me that actual exceeds expectations in every category. That is why although my observations of how we currently spend – we tracked each and every expense for the full year a couple of years ago – revealed expenses of $60,000, my retirement plan calls for double, a $120,000 annual income in retirement.

    1. James, thanks for your insight. I’m at exactly that point in my retirement planning of determining a realistic spending plan. Your advice is helpful. Better to assume more spending, and build in a contingency.

  6. A very interesting study. After nine years in retirement I can say our experience has been less dramatic . I was definitely a systematic planner for retirement. I tracted income and expenses using Quicken for ten years prior to retirement and built and tracked a ten year retirement projection spread sheet. My projections were good with some notable exceptions. The area I completely missed was Health care our expenses have been much higher especially dental care. We rarely spent more than $1,000 on dental before retirement and after retirement had several years that exceeded $5,000. All it takes is a few implants and crowns in a year. The other area was health care , prescription medicine and insurance. Even with an AARP prescription plan and Medicare supplement F we are spending well above my projections and preretirement level. All it takes is one hospitalization in a year , in my case a Shoulder surgery and my wife a knee procedure and pneumonia . We have been in the $10,000 range annually for medical spending which includes health insurance. I was planning on half that amount.
    As I expected our spending decreased initially in retirement but increased as we both retired and did more travelling and spent more on recreation, entertainment and wine and dinning. What good is retirement if you can’t enjoy yourself. We downsized our home in Ohio which cut costs, but bought a winter home in Arizona. Again spending I never saw coming in my projection. Our spending has leveled off and is more than preretirement. We could cut spending by doing less and selling the winter home in AZ, but we have no plans to do so right now. As for income in retirement I would say the study is right on. I planned to do consulting and could have but found it interfered with our plans. Why consult in NE in the winter when you’re paying for a winter home in AZ . A great blog Fritz -Thanks

    1. Dave – GREAT to hear from you, old friend! After working together for 20+ years, it’s great to hear that you’re retirement is going well. Great input to the discussion, thank you for your comments! Bummer that we lost our retirement health care benefit, that’s an expensive “Give”! Keep in touch!

  7. I am pretty sure my mind was just blown more times than in any other blog post I’ve ever read… but this takes the cake: “64% of folks over 70 are financially supporting others”

    Wow. So many of the other facts made sense to me, even if they were epiphany moments. This put how unknown our future realities really are into perspective. Thank you (as always) for the great article.

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