Not that the news has been cheery on the retirement front, with headlines blaring how unprepared most people are, but it could even be worse.

According to Forbes, there are a number of factors that are undermining just how well people can gauge their preparedness. Among them is the use of rule-of-thumb estimates on how much people may need to meet their expenses in retirement.

While aiming generally toward replacing 70 percent to 80 percent of your income may sound good enough — at least before you get close to the time when those numbers will have to be validated — if you don’t consider how much you personally may need, you could fall way short.

Studies have found that while most people spend about 14 percent less in retirement than they did while they were working, 35 percent spend about the same (so much for that 70 percent 80 percent!) and 12 percent actually spend more.

Tracking your expenditures for several months as you get closer to retirement will help you get a better handle on what you might need — particularly if you consider such factors as whether you plan to travel more, or whether your car will need to be replaced once you retire.

Then there’s Social Security. Trusting what the Social Security website predicts you’ll receive can be a dicey proposition, it said, pointing to the projection that the Social Security trust fund will be depleted by 2034. By how much might that reduce your benefits, and how much are you counting on them?

Pensions might not be such a sure thing, either, since many companies are freezing pension plans — and if you can’t stay with your employer long enough to be vested, that will affect what you might be able to draw on, too.

Oh, and if you’re planning on a job during retirement, you might want to rethink that as a sure thing; 48 percent of retirees who want to work aren’t; 35 percent are unemployed for health reasons, 5 percent provide care to a loved one and 8 percent just couldn’t find work. Even if you plan to work till age 65, you might not be able to, either due to ill health or because your job just disappeared. That means you’ll have less time to save and more time to spend.

Then there’s the good news: You might live longer. The bad news: You might outlive your savings.

People have a 50 percent chance of living longer than the “average” life expectancy used to calculate how much money they’ll need in retirement, which sounds great until you realize you’ll be broke in your final years.

Then there are those pesky issues around your investments: expected return (usually estimated high) and confusing investment returns with income. In the former case, projections of 7 percent to 10 percent returns are likely way too optimistic, given low interest rates, market volatility and other factors. An estimate of less than 5 percent annually would be more realistic. Even if you make that 5 percent, though, that doesn’t mean you can take the whole 5 percent out every year. Doing so could deplete the principal, which could run you out of money sooner rather than later.

Instant Insights /

People may be overestimating their retirement preparedness

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