Relative to other income groups, high earners tend to think they're on track for retirement when they're actually not, a new study found.
There's an important caveat here: The meaning of being "at risk" differs between income groups. Low-income earners who are at risk may not be able to afford basic living necessities in old age, while an affluent household is unlikely to fall into poverty, for example, the analysis said.
The affluent risk a "difficult adjustment that may require them to lower their expectations of their retirement lifestyle," the report said.The analysis leverages data from the Federal Reserve's, a triennial assessment of households. Its most recent iteration reflects 2019 data. The survey defines income groups by age and marital status. For example, the 2019 survey defines married couples ages 45 to 47 as low-, middle- and high-income if their median income is $50,000, $110,000 and $248,000, respectively.
The Center for Retirement Research uses the survey data to construct a National Retirement Risk Index. The index models retirement preparedness according to a range of assets like Social Security, pensions, home equity and employer-sponsored retirement plans, such as a 401. If they're not aware they should be saving more, they run the risk of having to cut back their consumption — perhaps substantially — in retirement.In 2019, 47% of American households were at risk of not being able to maintain their standard of living in retirement, according to the index. That's down slightly from the years following the 2008 financial crisis, but up significantly from earlier in the current century., meaning their savings must stretch over a greater number of years.
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