Personal Finance

These retirees are more likely to be ‘comfortable’ or ‘affluent,’ study finds

Although every retirement looks different, those with guaranteed income, little debt, a clear spend-down strategy and employer-provided assistance are among the most satisfied.     

That’s according to a study from the Employee Benefit Research Institute’s Retirement Security Research Center, profiling five types of retirees. The study uncovered patterns among retirees who identify as “average,” “comfortable,” “affluent,” “just getting by” or “struggling.”     

One key finding was average, comfortable or affluent retirees often had guaranteed sources of income, such as a pension or Social Security.  

“We saw a correlation in the findings between having varied sources of income and higher retirement satisfaction,” said Lori Lucas, CEO of EBRI. 

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Moreover, affluent retirees were likely to be nearly mortgage-free with no debt, whereas struggling retirees were often renters with “unmanageable debt,” like credit cards or medical bills.   

While retiring with large amounts of debt may be a financial burden, employees often leave the workforce sooner than expected due to job loss or health issues, said Lucas. Most target age 65 for retirement, but workers often leave their jobs closer to 62, she said.

Some 46% of retirees reported early departures in 2021, according to EBRI’s Retirement Confidence Survey.  

“This is data we’ve seen for years and years in the retirement confidence surveys,” she said. “People consistently believe that they’re going to retire later than they do.”

People consistently believe that they’re going to retire later than they do.

Lori Lucas

CEO of the Employee Benefit Research Institute

That’s why it’s critical to plan for retirement early, Lucas said.

Although many Americans can’t afford one-on-one guidance with a financial planner, many companies offer advice as an employee benefit, she said. Leveraging these services may make a difference in someone’s ability to meet their savings goals.   

“People that have access to advice are more confident about their retirement,” Lucas said.

The study also showed the importance of a clear spend-down strategy. Many retirees with sufficient nest eggs struggle to tap their funds. The biggest reason is that they worry about large, unforeseen expenses, such as high health-care costs or the need for assisted living. 

However, research shows that most people manage cash flow through the money in their bank account. Creating a “spending paycheck” may offer retirees more confidence to use their savings more freely. 

“It becomes an automated and less painful process,” Lucas added. 

The study uses EBRI’s Spending in Retirement Survey data, which polled 2,000 retired households in September 2020. The retirees were ages 62 to 75 years old with less than $1 million in financial assets. 

Among those surveyed, “comfortable” retirees had annual incomes from $40,000 and $100,000 and a nest egg between $99,000 and $320,000. “Affluent” retirees reported at least $100,000 in yearly income and assets of $320,000 or more.

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