The Retirement Confidence Gap: Why So Many Feel Behind — and What the Data Actually Shows

Every year, the Employee Benefit Research Institute (EBRI) publishes its Retirement Confidence Survey — one of the longest-running measures of how Americans feel about their financial readiness for retirement.¹ And every year, it reveals the same pattern: a large and persistent gap between what people think they need and what retirement actually costs.

This gap has real consequences. People delay retirement unnecessarily. They under-spend in their early years out of fear. They work additional years to reach a number that was never actually required. And some give up on planning entirely because the target feels unreachable.

Understanding where the gap comes from — and what the data actually shows about real retirement costs — is the foundation of a plan that's calibrated to reality rather than anxiety.

What the surveys show about confidence

The 2024 EBRI Retirement Confidence Survey found that only 21% of workers are very confident they will have enough money for a comfortable retirement — a number that has remained stubbornly low for decades despite rising stock markets and increasing 401(k) balances.¹

When asked how much they need to save, median responses among workers cluster around $1.5 million. Yet the same survey shows that a large share of actual retirees — people who have already retired — report living comfortably on substantially less. The disconnect is not just psychological noise. It reflects a systematic overestimation of what retirement costs.

What retirement actually costs: the spending data

The Bureau of Labor Statistics Consumer Expenditure Survey provides detailed actual spending data for households by age.² For households where the reference person is 65-74, average annual expenditures in 2023 were approximately $57,800. For households 75 and older, average spending dropped to approximately $43,800 — meaningfully lower than working-age households.

Key patterns in the data:

Transportation costs drop significantly — no commute, often one car instead of two
Food costs decline — especially food away from home
Housing costs fall for homeowners with paid-off mortgages
Healthcare costs rise — but not enough to offset the other reductions for most retirees
Taxes fall — no payroll taxes, lower income in many cases

The result: most households need 70-80% of their pre-retirement income to maintain a similar standard of living — and for many middle-income households with paid-off homes, the actual number is closer to 65-70%.

A realistic case: the couple who thought they weren't ready

Mark and Diane's situation: Mark, 64, and Diane, 62, have $620,000 in combined retirement savings — mostly in traditional IRAs. Mark's projected Social Security at 67 is $2,400/month; Diane's is $1,100/month at 67. Their combined projected Social Security at full retirement age is $3,500/month ($42,000/year).

They believe they are not ready to retire. Their financial anxiety is real — every article they read seems to reference a $1.5M or $2M target. But their actual spending is $68,000/year, including a $1,400/month mortgage payment that ends in 4 years.

The math at retirement:

Social Security (both at 67): $42,000/year
Portfolio withdrawal (4% of $620K): $24,800/year
Total income: $66,800/year

That's $1,200 below their current $68,000 spending — and that gap closes entirely when the mortgage ends in 4 years and spending drops to approximately $51,200/year. After the mortgage payoff, they have $15,600/year in surplus above expenses.

They're not behind. They're exactly where they need to be.

Why the confidence gap persists

Media and marketing incentives. Financial services companies have a commercial interest in making you feel underprepared. An anxious saver buys more products, contributes more, and stays engaged longer. Headline numbers like $1.5 million serve marketing more than planning.

Gross income replacement confusion. People compare retirement income to their current gross salary — including payroll taxes, retirement contributions, and work-related expenses they will no longer have. Net spending is the correct comparison, and it's almost always lower.

Anchoring to a round number. I need $1 million or I need $2 million are not plans — they're anchors. A plan built on actual projected spending, real Social Security estimates, and specific account balances is far more accurate and usually more encouraging.

Survivorship bias in financial content. Articles about early retirees with $3M portfolios are more compelling than articles about people who retired comfortably with $500K. The latter are underrepresented, which distorts perception of what's normal.

How to close the gap in your own mind

Use your actual spending. Pull 12 months of bank and credit card statements and add up what you really spent — not what you think you spent.
Get a Social Security estimate. Log in to ssa.gov and review your actual projected benefit at 62, 67, and 70. This is real data, not a guess.
Model the mortgage payoff. If your mortgage ends before or shortly after retirement, your spending drops — sometimes by $1,000-$2,000/month. That matters enormously for plan adequacy.
Run a floor analysis. What does your guaranteed income (SS + pension, if any) cover? If it covers 70%+ of your floor spending, your portfolio is funding discretionary expenses, not survival — and that is a fundamentally different and more manageable situation.

Common mistakes

Saving more at the expense of living now. Extreme saving in your 50s to reach an overestimated target delays experiences that are worth more at 55 than at 80. Balance matters.
Assuming spending will be the same in retirement. For most retirees, spending declines in real terms through their 70s, then rises with healthcare in their 80s. A flat projection overestimates mid-retirement costs.
Ignoring Social Security as an asset. The present value of a $2,000/month Social Security benefit at age 67 is approximately $350,000-$450,000 — a significant asset that most net worth calculations omit entirely.

Disclaimer: This article is for educational purposes only. Retirement readiness depends on your specific spending, assets, health, and goals. Use ModernRetire planning tools or consult a licensed financial planner for a personalized assessment.

References

Employee Benefit Research Institute — 2024 Retirement Confidence Survey. https://www.ebri.org/retirement/retirement-confidence-survey ↩ ↩²
Bureau of Labor Statistics — Consumer Expenditure Survey 2023, Table 1300. https://www.bls.gov/cex/tables.htm ↩