RETIREMENT PLANNING  |  july 21, 2023

How You Can Build Confidence Toward Your Retirement

Make the connection between your choices today and your long-term plans.


Key Insights

  • Confidence in your future retirement starts with recognizing that today’s financial behaviors and progress made toward financial goals affect tomorrow’s outcomes.

  • Our research shows that confidence declines as retirement approaches, which may reflect increasing anxiety and uncertainty for preretirees as they approach retirement.

  • We also learned that retirees are more confident than preretirees about finances. That’s both encouraging and a sign that starting to plan sooner can yield benefits.

Sudipto Banerjee, Ph.D.

Vice President, Retirement Thought Leadership

Roger Young, CFP®

Thought Leadership Director

When it comes to saving for a financially secure retirement, it is often said that slow and steady wins the race. That sounds easy, but life often throws us a curveball or two and priorities may need to be adjusted.

Most of us have common financial goals, such as starting a family, buying a home by a certain age, saving for retirement, repaying student loans, or saving for our children’s education. Trying to accomplish all of these goals at the same time, with limited financial resources, can make it challenging to prioritize. If the timing of these goals is compressed, it can be even more difficult. Unexpected financial shocks, such as a large medical expense or a job loss, can negatively affect your financial goals.

Why It’s Difficult to Prioritize Future Financial Goals

It’s no surprise that people struggle to balance between short-term and long-term financial needs and goals, even under the best of circumstances. If someone has a bill due today and a bill due tomorrow, today’s bill usually wins.

We often suggest that people should save at least 15% of their income (including any employer match) to ensure a comfortable retirement. Many do not save this much, and some cannot. Each year we conduct a research study that examines the saving and spending behaviors of those still working and saving for retirement as well as retirees. We found that over half are falling short of that 15% savings target. We also found that other savings goals and debt are significant barriers to saving for retirement.

Connecting Today’s Financial Behaviors to Retirement Outcomes

We examined how well people strike the balance between what they do today and how those actions relate to the outcomes they expect to achieve in the future. In other words, do these behaviors affect confidence in one’s future? We specifically looked at:

  • Household financial behaviors (e.g., using a budget, paying bills on time)

  • Progress toward financial goals (e.g., saving for retirement, paying down debt, buying a home)

  • One’s outlook on retirement and what is or will be true (e.g., lifestyle, running out of money, withstanding a major financial shock)

Our study found that the single largest factor that drives confidence in one’s financial future is their amount of retirement savings. This isn’t surprising. People generally save after all their bills are paid. Therefore, the people who are making a connection between saving today and their future financial security are more confident about their future.

What Gets in the Way of Saving for Retirement

(Fig. 1) Debt and other goals vary during lifestages.

Survey respondents had a variety of reasons for saving less than 15% of wages, but the majority responded they are saving all they can afford.

Respondents could choose more than 1 reason for saving less than 15%.
Source: T. Rowe Price 2022 Retirement Savings and Spending Study.

Confidence Declines as Retirement Approaches

Our study found that financial behaviors and progress toward goals generally improve with age. Confidence in having a successful retirement, however, was shown to decrease as workers get older.

This observation may reflect some natural youthful optimism and increasing anxiety as retirement approaches. The nature of competing financial priorities also shifts as retirement approaches. Early in life, goals such as buying a home, repaying student loans, or saving for future education give way to unfamiliar topics and different choices. These often include Social Security, Medicare, and long-term care and, for some, making choices between spending versus legacy or charitable goals. Workplace retirement plans do a wonderful job of helping us save for retirement, but they may not focus on helping us make the transition to retirement. Our study found that, in retirement, the focus shifts from retirement saving to income, thus highlighting the importance of retirement income planning.

Retirees Report Fewer Financial Worries

Those near retirement have real concerns about their future. The good news is that we see retirees have fewer worries than those who are still working.

Naturally, confidence improves as a person gains experience with something. Our research has also found that retirees successfully make financial adjustments in the first few years of retirement. The stark difference between preretirees’ expectations and retirees’ experiences demonstrates that preretirees would benefit from positive reinforcement of the healthy financial behaviors they are practicing today.

Retirees Are More Confident About Their Finances

(Fig. 2) How retirees feel about their ability to achieve financial goals.

Retirees Are More Confident About Their Finances
Preretiree and Retiree Sentiment Working
Baby Boomers
(ages 56–74)
Positive Statements
Answered Yes
I will have enough money to pay for health care 37% 56%
I will live as well as or better than when I was working 30% 47%
I will be able to withstand a major financial shock like a major house repair or major medical bill 33% 47%
I will be able to leave money to family members or charities 20% 37%
Negative Statements    
I will have to reduce my standard of living 32% 22%
I will run out of money 17% 11%

Source: T. Rowe Price 2022 Retirement Savings and Spending Study.

So, how can you increase your level of confidence in your retirement?

Look for opportunities to ramp up savings.

Try to picture a timeline for your personal financial goals. Gaps between goals can be a good time to save more. Other opportunities to save may be after paying off specific loans or when major expenses go away.

Keep saving at some level for retirement every year.

We understand that you may not always be able to save 15%, but it’s important to keep saving something. If you need to redirect resources at some stages of life, such as when your children are in college, try to maintain the level you save in total. Continuous progress toward saving for retirement builds confidence and keeps you motivated.

Think about the new priorities that may compete for your attention (and dollars) in retirement.

You’re already making choices about your lifestyle and spending. In retirement, those may be coupled with a desire to leave a legacy or focus more on charitable causes. You’ll also need to think about major risks such as health issues or outliving your money. Focusing on your priorities can help you make purposeful decisions, rather than sacrificing spending or enjoyment out of fear.

Talk to your partner or other trusted loved ones.

Consulting loved ones or a financial professional can help you get comfortable with the new decisions you will face. Most of our survey respondents don’t get help from a professional, which might contribute to the lack of confidence. We found that people who create a plan for retirement that involves both the financial side and how they want to spend their time, are more satisfied and confident in retirement.

Important Information

This material is provided for general and educational purposes only and is not intended to provide legal, tax, or investment advice. This material does not provide recommendations concerning investments, investment strategies, or account types; it is not individualized to the needs of any specific investor and not intended to suggest any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision-making.

The views contained herein are those of the authors as of May 2023 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

All investments involve risk. All charts and tables are shown for illustrative purposes only.

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