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Getting fooled financially
Photo Illustration by Tiffany Herring for Money, Getty Images (3)

Sixty-three percent of workers are very or somewhat confident of having enough money for a comfortable post-career life, according to the Employee Benefit Research Institute's latest Retirement Confidence Survey. But when you look at how little many people have stashed away for retirement—the average 401(k) balance is less than $100,000—you have to wonder how accurate their self-assessment is. So how can you tell whether you're being realistic about your retirement planning efforts or deluding yourself? Here are five ways.

Even if you think you're doing a good job preparing for retirement, you may be fooling yourself if:

1. You don't do periodic retirement check-ups. Saving regularly—ideally, about 15% or so of pay per year—is the cornerstone of any retirement strategy. But saving alone isn't enough. You also need to ensure that you're actually making progress toward a secure retirement and, if not, take steps to get on track.

Fortunately, assessing whether you're making sufficient headway isn't all that difficult. By going every year or so to a good online tool like T. Rowe Price's Retirement Income Calculator (which you can find in RealDealRetirement's Tools & Calculators section) and plugging in such information as the percentage of salary you're saving, how your nest egg is divvied up between stocks and bonds and the age at which you plan to retire, you can come away with an estimate of the probability of achieving your goal. If you find your chances are slimmer than you'd like—or that they've dropped from the last time you did this assessment—you can see how saving more, investing differently or changing your expected retirement date can improve them.

If you're not confident of your ability to do this sort of evaluation on your own, you can always consult an adviser. But if you fail to perform this sort of exercise throughout your career, you could find yourself closing in on your planned retirement date woefully short of the resources you need to maintain your standard of living.

2. You lack a disciplined investing plan. If your idea of a savvy retirement strategy is investing in whatever funds have topped the performance charts lately, "diversifying" your portfolio with every new arcane ETF that comes along, or trying to time the market to avoid downturns and capitalize on rallies, then you don't really have a strategy at all. You're winging it, and jeopardizing your retirement prospects by doing so.

A more effective approach: Build a diversified mix of stocks and bonds that matches your appetite for risk, which you can do by going to Vanguard's risk tolerance-asset allocation questionnaire. Then invest as much as possible in funds with low fees, preferably index funds or ETFs that offer broad exposure to the stock and bond markets, so that less of the market's returns go to the fund management company.

Once you've created your retirement portfolio, resist the urge to tamper with it, even (or especially) when the market is volatile. Instead stick with the stocks-bonds blend you originally set, except to rebalance occasionally and perhaps to shift gradually more toward bonds as you age. If you find the prospect of assembling a diversified portfolio on your own too daunting, consider going with a target-date retirement fund.

3. You figure you can skimp on saving by working longer. True, spending a few extra years on the job can significantly improve your retirement prospects by giving your nest egg more time to grow, boosting the size of your Social Security benefit, and reducing the number of years your savings have to support you. Problem is, even if you want to extend your career, the choice may not be yours. EBRI figures show that nearly half of retirees ended up leaving their jobs earlier than they'd planned, usually due to health problems or disabilities, downsizing or layoffs at their company, or having to care for a spouse or other family member.

So if you're approaching retirement age and find that your nest egg isn't large enough to support the post-career lifestyle you'd envisioned—and you're able to work a few more years—by all means do so. But don't base your savings regimen on the assumption that you'll be able to work as long as you like. If you are unable to do so, you may have no choice but to dramatically scale back your standard of living.

4. You think you can make up for an undersized nest egg by working in retirement. Working on and off or part-time can be a good way to generate extra cash in retirement and, in so doing, reduce the risk of depleting your savings too soon. And surveys routinely show that two-thirds or more of people expect to work for pay after they leave their regular career.

More from Do You Have Enough Retirement Savings For Your Age?

But that expectation may not square with reality. In fact, EBRI data show that only slightly more than a quarter of retirees have actually worked for pay after they retired. This doesn't mean you shouldn't seek a retirement gig by checking out sites like RetiredBrains if you want to bolster your retirement cash flow (or even to stay more socially engaged). But it does mean that you should make a point of saving and planning during your career, so that taking on a job in retirement is something you do because you want to, not because you have no other choice.

5. You don't have a plan to turn savings into income. Building an adequate nest egg during your working years is only half the job of preparing for a secure retirement. The other half is making sure the savings you've accumulated during your career plus other resources (Social Security; a pension, if any; home equity; and any other assets) can sustain you throughout a retirement that may very well last into your 90s. And the only way to ensure you're adequately addressing that task is to create a comprehensive retirement income plan.

That plan should include doing a retirement budget to estimate the expenses you'll face once the paychecks stop, deciding the age at which you should claim Social Security and settling on a reasonable withdrawal rate that can give you the income you'll need without depleting your nest egg too soon. Ideally, you should begin developing that plan in the five or so year before you expect to retire. Wait too long or blow off this important task entirely, and you could find yourself on the verge of retirement with no real sense of whether you're truly prepared for your post-career life.

Walter Updegrave is the editor of If you have a question on retirement or investing that you would like Walter to answer online, send it to him at You can tweet Walter at @RealDealRetire.