Almost 30% of Households ‘Not Worried Enough’ About Retirement (And Why it Matters)

A recent survey found that nearly 30 percent of Americans are “not worried enough” about retirement, and that’s not a good thing, retirement experts say.  

While not being a worrier is typically touted as an admirable quality in a person, economists and retirement researchers from the Center for Retirement Research at Boston College (CRRBC) say that’s not the case when it comes to retirement savings.  

When people aren’t worried about their financial situation, that typically means that they aren’t very likely to do anything about it, the researchers explain in their analysis.  

“Households that are not worried enough about their retirement income may not save enough even if they have the opportunity,” wrote economists Anqi Chen and Yimeng Yin, and retirement expert Alicia H. Munnell, Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management.  

Their analysis is based on the data included in the National Retirement Risk Index (NRRI), which looks at how Americans perceive their retirement risk compared to how “on track” they are. This is what their findings revealed:  

• 40 percent are in good shape and know they are in good shape 
• 20 percent are in bad shape and know they are in bad shape 
• 28 percent are not worried enough about retirement 

• 12 percent are too worried about retirement 

Collectively those who are in bad shape and those who aren’t worried enough about retirement make up almost 50 percent of households.  

The NRRI evaluates what kind of financial shape working-age households believe they are in for retirement, specifically it is looking for those who are not prepared financially.  

Those who are not prepared for retirement are defined as those who will not be able to maintain their pre-retirement standard of living based on their current savings rate.  

The information used for the NRRI is from the Survey of Consumer Finances (SCF), which is a national survey conducted by the Federal Reserve every three years.  

According to the NRRI, if a household is not within 10 percent of the defined “target” then it is considered “at risk.” 

While nearly half of all households are considered at risk for not being prepared for retirement, only about one third of households know it, according to the SCF.  

When the SCF asked households to self-report the sufficiency of their retirement income, 34 percent said they were at risk.  

One interesting finding from the analysis is that while households within various income levels all underestimate their retirement preparedness, “higher-income households are most likely to underestimate their risk.” 

One possible reason for the optimism is that households are now asked to include non-retirement assets in their assessment such as real estate and stock market investments. Given that the housing and stock markets have demonstrated a strong rebound since the Great Recession in 2008, this contributes to households feeling more confident about their retirement preparedness.  

According to the researchers, some of the reasons for households “not being worried enough” about their retirement savings includes the following: 

• A misunderstanding of their housing debt-to-asset ratio. While housing prices have gone up, which may provide comfort to households, it doesn’t change how much they still owe on their mortgages.  
• Account balances. While someone may look at an account balance of say $100,000 and think that looks like a lot of money, in reality $100,000 will only give households roughly $600 per month in monthly income.  
• Two earners. In the case where there are two earners, it’s not uncommon for only one of the earners to be contributing to a retirement account. 

When evaluated according to racial and ethnic groups, the researchers also added that Black and Hispanic households are more likely to “not be worried enough.”