Those who don't have a retirement plan had better figure out
a plan B for retirement, because a new study suggests that they're more likely
to misjudge their expected retirement date. While a number of studies have
found a gap in retirement expectations, a new analysis by the Employee Benefit
Research Institute (EBRI) finds that those without a retirement plan had
larger differences between expected and actual retirement compared with those
who had either a DB or DC retirement plan.
Moreover, according to the EBRI analysis, those who
participated in a retirement plan reported a lower-than-expected probability of
working full time after age 65. For example, in 2012, the expected probability
of working full time after age 65 was 50.8% for those who did not participate
in a retirement plan in their current jobs, compared with 44.0% among those who
The expected probabilities of working full time after age 65
are higher for those in DC plans compared with those in DB plans, though the
gap between expected and actual retirement is generally very small between
those with DB plans and those with DC plans. However, those with DB plans
showed a much higher increase in the expected probability of working full time
after age 65 between 2006 and 2012. The expected probability of working full
time after age 65 does not vary with wage earnings.
Impact of the
The EBRI analysis also found that the gap in retirement
expectations widened following the 2008 financial crisis. According to the
report, prior to September 2008, when the investment markets crashed, 83.9% of
workers retired either earlier or no later than three years after their
expected retirement, compared with only 59.3% who did so after September
The EBRI report notes that most of the past studies on the
retirement expectations gap are based on cross-sectional data, which compare
the retirement expectation of workers to the actual retirement decision of
retirees. While those findings suggest that workers are overly optimistic about
working longer than the actual experience of retirees, these comparisons are
generally made between the expectations of workers and the experience of a
completely different group of retirees. The EBRI analysis examined the
expectation and actual retirement decision for the same set of individuals and
also compares this to the cross-sectional findings.
Cross-sectional findings suggest that workers expect to work
later than shown by those who have already retired. In 2012, the expected
probability of working full time after age 65 was 48.7% for full-time men and
46.0% for full-time women, though only 12.7% and 6.0% of men and women actually
worked full time after age 65.
Longitudinal findings (comparing the same individuals at
different points in time) revealed that more people actually retired (35.9%)
after 65 than expected (18.9%), and that actual retirement is more evenly
distributed between pre- and post-years of expected retirement than what the
cross-sectional findings suggest. Longitudinally, 38.0% retired before they
planned, but 48.0% retired after they planned.
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