Americans Expect Retirement Savings to Fall Short of Their Lifespan

Americans see a five-year gap between how long they hope to live and how long they think their finances will support them. A survey of 1,000 U.S. adults by life insurance technology company Ethos found that respondents want to live to an average age of 88, but expect their money to last only until 83. The gap points to a practical planning problem: people may be anticipating a long retirement without confidence that their savings can fund it.

The shortfall looks broader when people with no retirement savings are included. Seventeen percent of respondents expected their retirement savings to run out before age 80. Among respondents with no savings and those who expected to exhaust their savings before 80, the combined share was 47 percent. Those figures describe respondents’ expectations, not a forecast of how long any individual’s money will last. Still, they show how many people enter retirement planning with little confidence in the resources available to them.

Care costs widen the gap

Long-term care appears to be one source of the disconnect between expected expenses and financial preparation. Respondents estimated that a nursing home stay would cost an average of $60,829 a year. The national average for a semi-private room was $112,420 per year, according to the Federal Long Term Care Insurance Program’s 2024 Cost of Care Survey, administered by the U.S. Office of Personnel Management and conducted by illumifin.

The survey estimate was roughly 54 percent of that reported national average. For households trying to judge whether their savings can cover later-life needs, a gap of this size can change the picture considerably. A plan built around an understated care-cost estimate may leave less room for other expenses once care becomes necessary.

Confidence in affording life to age 80 fell across every generation in the Ethos survey after respondents considered actual care costs. Gen Z showed the largest decline: the share who felt able to afford life to 80 fell from 61 percent to 51 percent. Among baby boomers, it dropped from 67 percent to 62 percent. The figures suggest that exposure to the cost estimate changed respondents’ sense of what their resources might cover.

That matters for middle-class households that expect Medicare to pay for custodial care. As InvestmentNews has reported, many middle-class Americans plan to rely on Medicare for custodial care, which it does not cover. When people leave that expense out of their assumptions, the resulting plan may not account for the care they could need or the effect it could have on retirement savings.

Retirement income expectations don’t match the account

The survey also found a mismatch between what some people expect from a 401(k) and what the account itself provides. Among respondents with a 401(k), 40 percent expected it to pay a monthly check for life. That share rose to 48 percent among those who named a 401(k) as their primary retirement vehicle. A traditional 401(k) does not automatically provide lifetime income, so the expected paycheck may require a separate decision about how to turn savings into income.

The distinction matters because a balance in an account and a steady payment over a lifetime solve different problems. A balance can be drawn down to meet expenses, but people must manage how long it lasts. Lifetime income can make payments more predictable, while the amount available to spend or leave to heirs may depend on the choices made. The survey does not establish which approach will suit a given household; it reveals that many respondents may expect their savings to deliver a feature they have not arranged.

On the question of managing longevity risk, respondents expressed interest in guarantees. Sixty-six percent said they would prefer a smaller guaranteed paycheck for life to a larger balance that could run out. Asked how much they would convert into a guaranteed income stream, 33 percent said roughly half their retirement savings, while another 29 percent said a quarter. Those preferences point to a perceived tradeoff between more predictable income and retaining a larger pool of assets under personal control.

Advisors working with retirement risks have identified longevity risk as a significant concern. The Ethos responses put a client-side dimension on that concern: many respondents want a dependable income stream, yet their expectations about 401(k) payments suggest that the mechanics may not be clear to them.

Leaving money to family remains a priority

Concern about outliving savings did not translate into a strong stated willingness to reduce inheritances. When asked how they would respond if told they would live to 95, 36 percent said they would work longer, and another 36 percent said they would downsize or reduce their own lifestyle. Only 4 percent said they would cut what they planned to pass on to family.

That preference could complicate planning for care and retirement income. Someone who aims to preserve an inheritance may be reluctant to spend savings on their own later-life needs, even when care costs put pressure on the household budget. InvestmentNews has covered how advisors increasingly treat long-term care as part of retirement planning, where the expected cost can affect assumptions about income, spending and what remains for heirs.

The survey found that 47 percent of respondents were more worried about dying too soon than outliving their money, a concern reported by 29 percent. Both responses relate to financial security for loved ones, but they point to different planning pressures: ensuring family members have support if a person dies early, and ensuring savings can cover the person’s own needs over a long life.

For advisors, the findings offer a clear starting point for conversations about how clients expect retirement accounts to pay out, what care may cost and whether family bequests take priority over spending on the client’s own needs. The survey cannot determine what any household will ultimately face. Its figures do show that respondents’ assumptions about care costs and lifetime income may not line up with the financial risks they say they fear. The practical question is whether those assumptions are being tested before care needs arise.

Read the Ethos survey for its findings on Americans’ expectations about lifespan, retirement savings and guaranteed income.