WASHINGTON, D.C. -- Three in four retired Americans say they have enough money to live comfortably, consistent with retiree perceptions across the 23 years Â鶹´«Ã½AV has tracked views on retirement in its Economic and Personal Finance surveys conducted each April.
This generally positive picture of retirement contrasts with the more negative expectations among those who have yet to retire. Just about half of nonretirees, 45% this year, say they will have enough money to live comfortably when they retire, much lower than the experience reported by retirees themselves.
This retirement reality versus expectations gap has persisted since Â鶹´«Ã½AV began systematically collecting this information in 2002, although there has been some variation over the decades in nonretirees’ expectations. As Â鶹´«Ã½AV noted in last year’s report, “Nonretirees’ outlook has been consistently lower and subject to swings based on the national economic climate.”
This disparity in views of retirement is underscored by an analysis of the views of retirees aged 65-80 today compared with the expectations of this same cohort 20 years ago. Just over half of those who were 45-60 in 2002-2004 projected that they would have enough money to live comfortably when they retired. But 79% of this same cohort of Americans who are retired 20 years later in fact end up saying they have enough money to live comfortably.
For this age cohort of Americans, the reality has turned out to be significantly more positive than they anticipated two decades ago.
A Big Factor in Lowered Expectations Is Doubts About Social Security
The disconnect between the retirement expectations of nonretirees and the more positive outcomes among those who are now retired has several possible explanations. Retirees may take unanticipated advantage of the opportunities to downsize and move to cheaper areas of the country, and they may have unanticipated lower daily expenses in general without work or childcare responsibilities. Medicare may help cover healthcare costs in ways not anticipated, even if they have greater healthcare needs in retirement than they did before. And, importantly, the disconnect is explained by the unanticipated value of Social Security in retirement.
An analysis of aggregated data from 2019-2024 (involving interviews with 2,087 retirees and 3,935 nonretirees) shows that an average of 58% of retired Americans say Social Security is a “major source” of their retirement income, making it the important bedrock of their financial security. This is much higher than those who say pension plans (34%) and 401(k) and retirement plans (29%) are major sources of their retirement incomes.
In contrast to the 58% of retirees for whom Social Security is a major source of income, barely a third (35%) of nonretirees, on average, say they expect Social Security to be a major source of retirement income. This puts Social Security significantly behind the 50% of nonretirees who expect that 401(k) and retirement accounts will be a major income source when they retire -- nonretired Americans’ No. 1 projected retirement source. But in an oppositive pattern to the increased importance of Social Security in reality, investments are much less important in retired reality than is anticipated by Americans before they retire.
Additionally,
- Nonretirees are far more likely to perceive that part-time work will be a major income source than is actually the case with retirees, 20% versus 3%.
- Nonretirees are much less likely to say that a pension plan will be a major income source than is the case among retirees, most likely reflecting the decline in the number of companies today that offer defined pension plans for their employees.
Among nonretirees, there has been a modest uptick in projections about the importance of Social Security as a major source of retirement income compared with 20 years ago -- from less than 30% to the mid-30% range. But the significant perceptions versus reality gap has persisted as far back as Â鶹´«Ã½AV has data. A consistently higher percentage of retirees have rated Social Security as a major source of their income than is the projection among nonretirees in every year since 2002.
The yawning gap between expectations about Social Security and reality is made evident by an analysis of shifts in the attitudes of those who were aged 45-60 two decades ago. Only 35% of this group of nonretirees in 2002-2004 projected Social Security to be a major source when they retired. Twenty years later, a significantly higher 61% of retirees in the same cohort (now 65-80 years old) report that in fact Social Security has turned out to be a major source of income.
Other Â鶹´«Ã½AV research underscores the lack of confidence in the long-term viability of Social Security among nonretirees.
- Only about half of nonretirees Â鶹´«Ã½AV interviewed last June and July say they expect the Social Security system to pay them a benefit when they retire.
- A research study conducted by Â鶹´«Ã½AV and West Health from November 2023 through January 2024 found that 80% of Americans 62 years of age and under are worried that Social Security will not be available when they are eligible to receive it, up from 75% two years ago.
Financial Comfort Based on Sources of Retirement Income
Despite Social Security’s importance, the majority of retirees report having major sources of income in addition to (or, for some, in lieu of) Social Security. Similarly, and not unexpectedly, the significant majority of nonretired Americans expect they will have sources of income in lieu of or in addition to Social Security.
To explore these relationships further, retirees and nonretirees interviewed over the past six years were categorized into segments based on their reports about projected or actual income sources -- 1) those for whom Social Security is or is projected to be their only major source of income; 2) those who name Social Security and one other major income source; 3) those who name one or two major income sources but not Social Security; 4) those who name three or more major income sources (which may or may not include Social Security); and 5) those who name no major income sources.
A relatively small 23% of retirees say their only major income source in retirement is Social Security. Sixty percent of this group say they have enough money to be comfortable, leaving about four in 10 retirees relying only on Social Security who are not financially comfortable. This is the lowest “comfortable” reading across any of the retiree segments.
In short, while six in 10 retirees are financially comfortable with Social Security as their only major income source, there are many others in this situation who are struggling.
The 60% of retirees living comfortably with Social Security as their only major source of income dwarfs the 21% of nonretirees who expect to be financially comfortable in retirement if their only projected major income source is Social Security.
By contrast, 78% of retirees who report having at least one major income source in addition to Social Security are financially comfortable. Again, this far exceeds the 34% of nonretirees who expect to have Social Security and at least one other source of income in retirement and expect to be living comfortably.
Two other groups of retirees, constituting about half of all retirees, are even more comfortable:
- Over eight in 10 of those who have three or more major sources of income in retirement (which may or may not include Social Security) are financially comfortable.
- And a nearly universal 94% of those who don’t count on Social Security at all as a major source, but have one or two other major income sources, are financially comfortable.
Finally, 70% of retirees who do not list any of the 10 sources tested as major income sources in their retirement (about 11% of all retirees) are financially comfortable. It’s probable that these retirees have a combination of sources that, while viewed as “minor sources,” together are still enough to provide financial stability.
In all instances, nonretirees who expect to have each of the varying sets of income sources in retirement discussed above are less likely to project financial comfort than the actual financial comfort of retirees who in reality end up with each of these income sources.
What do these data tell us? Social Security is clearly important for retirees, particularly those for whom Social Security is their only major income source. For most of these retirees, Social Security is enough for them to define themselves as “financially comfortable.” But four in 10 of this group say they are not financially comfortable. That finding, plus the fact that retirees who have income sources other than Social Security are across the board clearly more financially comfortable than those who rely only on Social Security, indicates that Social Security can be classified as a fundamental but -- for many -- not sufficient resource in retirement.
The data also confirm that regardless of projected income sources, many fewer nonretirees across all scenarios expect to be financially comfortable in retirement than is the case based on reports from actual retirees.
Bottom Line
Â鶹´«Ã½AV’s continuing measures of the retirement projections of nonretirees and the reality as reported by actual retirees provide valuable insights -- both for Americans who are planning their retirement and for policymakers who continue to confront the future of Social Security.
The finding that the majority of nonretirees are not counting on Social Security as a major income source can in some ways be construed as a positive -- serving as motivation for younger workers to develop other sources of retirement income while they can. Running scared about retirement, in other words, could spur people to take action while they are still in the earning class -- actions that could result in a more comfortable retirement than they currently envision.
Of course, for many younger Americans, building investment accounts is easier said than done. Those living paycheck to paycheck do not have a great deal of cash to put into 401(k)/IRA accounts. This is borne out by statistics showing that most Americans -- even those near retirement age -- have relatively small 401(k) balances. But employers, cognizant of these findings, could for their part do more to bolster their contributions to retirement plans as part of employee benefit packages. And there could be increased efforts to push employees toward default or mandatory contributions to retirement plans.
Another significant source of income for retirees is work-related pension funds, but fewer and fewer companies today offer pensions, making this something workers can’t do much about. The value of jobs that continue to offer pensions may be reflected in reports that young people today view government jobs (many of which offer pensions) more positively than they have in the past.
For government, the major recommendation that arises from these data is a continuing focus on maintaining Social Security’s viability. Although Social Security is clearly not a total solution to financial security in retirement, retirees have continually over the past 23 years listed it as their most important source of retirement income -- clearly a key component of many retirees’ financial comfort in their post-working years.
Additionally, Medicare is almost certainly an important part of retirees’ financial comfort in retirement. Â鶹´«Ã½AV data show that Americans 65 and older are much more satisfied than those who are younger with the total cost they pay for healthcare; are much less likely to have put off health treatment due to cost; and are more positive about their healthcare coverage and the quality of healthcare they receive. These findings would seem to justify efforts by the federal government to place a high priority on maintaining Medicare in the years to come.
In terms of retirement income sources, the government can profitably, the data suggest, engage in a two-pronged strategy: maintain Social Security at all costs and continue practical and motivational efforts to encourage nonretirees to build retirement accounts.
To stay up to date with the latest Â鶹´«Ã½AV News insights and updates, follow us on X .
Learn more about how the works.
View complete question responses and trends (PDF download).
