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75% Of Americans Underestimate Their Retirement Savings Needs

75% of Americans Underestimate Their Retirement Savings Needs

Many Americans struggle to come up with an official retirement savings target. After all, in the absence of a crystal ball, it’s hard to know what your senior living expenses will look like down the line, and it’s downright impossible to predict how many years of retirement you’ll actually end up needing to fund.

Still, those of us who are planning for retirement can do our best to guess at these costs and establish our nest eggs to align with what we think we’ll ultimately need. The problem, however, is that most Americans aren’t good at this particular guessing game.

In a recent study by Fidelity Investments, 75% of respondents underestimated the amount of money they’ll need in retirement. Specifically, 72% weren’t aware just how expensive healthcare in retirement can be, while 22% came up with a medical care figure that fell about $200,000 short of what recent projections actually call for.

Retired couple shopping
IMAGE SOURCE: GETTY IMAGES.

And it’s not just expenses a large number of us are underestimating; we’re also selling our life expectancies short. Almost 40% of respondents felt they’d be OK with enough savings to last for just 12 to 17 years, but given that Americans are living longer these days, those who retire on time (meaning, at full retirement age for Social Security purposes) should plan for 20 years of savings at a minimum. Furthermore, since the Social Security Administration reports that one in four 65-year-olds today will live past the age of 90, while one in 10 will live past 95, a significant portion of the senior population will need savings that last a good 25 to 30 years, if not more.

What all of this tells us is that while we can’t be expected to come up with definitive retirement savings targets, most of us do need a better understanding of what it will cost to sustain ourselves once we stop working. And the sooner we get educated, the better positioned we’ll all be to ramp up our savings game.

How much will you spend in retirement?

The amount of money you’ll need in retirement will depend on a number of factors, such as where you live and how you spend your days. It stands to reason that a retiree living in a big city with plans to dine out and visit the theater regularly might spend more than someone who plans to live in a modest town and keep busy tending to his or her home and garden.

That said, there are certain universal costs that all apply to all retirees, regardless of desired lifestyle, and these are the ones we should all be aware of. We just learned that many Americans…

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