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Published: Jan 26, 2024 4 min read
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There’s no perfect formula for a comfortable retirement — but even so, workers approaching retirement age may be majorly underestimating how much they’ll need to budget.

A recent report from the Nationwide Retirement Institute found that the expectations of retirement-age workers don't always line up with the financial realities of those who are already retired. In a survey of 1,000 U.S. adults aged 60 to 65, retired respondents said they spend a lot more on basic expenses than those who are still working predict they’ll need.

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Retirement expectation vs. reality

Judging by the survey’s results, American workers preparing to leave the workforce may be misjudging what their cost of living will be in retirement. Current retirees said they spend 53% of their budget on necessities like housing and food, while workers said they expect those expenses to take up just 42% of their income.

What’s more, current workers said on average that they plan to retire at 67, but retirees reported exiting the workforce an average of seven years sooner, at age 60.

It may not be surprising, then, that current workers' lifestyle expectations don’t match up neatly with what actual retirees reported. While 68% of retirees surveyed said they have “moderately” or “very” comfortable lifestyles, almost a third said they’re not financially comfortable.

Among the retirement-age workers who have not yet retired, 77% said they expect to be moderately or very comfortable. Just 23% said they don’t expect to be comfortable.

The cost of retirement varies based on factors like location, debt and lifestyle choices, but U.S. Bureau of Labor Statistics data shows that households 65 and older spent an average of $4,345 a month in 2021.

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The impact of under-budgeting

What’s a retiree to do when everyday expenses are eating up so much income? In some cases, go back to work.

Roughly 1 in 3 are planning around or actively considering re-entering the workforce, according to the Nationwide survey, and 45% of that group said it’s because they’re afraid of running out of money. Smaller swaths said they want to go back to work to add more structure and socialization to their lives.

These findings track with a September analysis from investment management firm T. Rowe Price, which revealed that 20% of retirees are working either full- or part-time. About 48% said it was for financial reasons, and 45% said they’re working for the social and emotional benefits.

Social Security shortfalls may be partially to blame for the discrepancies between workers’ budget expectations and the experiences of current retirees: The Nationwide report found that 36% of retirees said their benefits turned out to be less than they expected.

With the trust fund that bankrolls Social Security barreling toward insolvency, benefits could be even smaller by 2033 if legislators fail to pass a funding solution. In that event, the Committee for a Responsible Federal Budget, a public policy organization, estimates that retirees could see a universal 23% benefits cut.

Almost 75% of retired respondents to the Nationwide survey said such an outcome would impact their retirement “a lot,” and 71% of respondents who are still working said the same. Overall, they’re feeling pretty pessimistic about the public safety net — only 41% of all respondents expect Social Security to exist in its current capacity throughout their retirement.

More from Money:

Early Retirement Savers Are Burning Out. ‘Coast FIRE’ Might Be the Answer

What Retirement? More Americans 65 and Older Are Working Full Time

6 Smart Ways to Deal With Debt in Retirement

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