Preretirees envision themselves lacking enough retirement income to live in comfort once they leave the workforce, but some financial advisers suggest that a pessimistic retirement outlook can become a self-fulfilling prophecy.

There's a pattern of disconnection between the lifestyle that preretirees imagine they can afford and the reality of living in retirement for a majority of retirees, who say they have enough money to live comfortably. Some financial advisers here say that the perceived pessimism can impact savings gains for preretirees.

Mike Maehl, Spokane-based senior vice president at Opus 111 Group LLC, a Seattle financial services company, says savers who react emotionally to changing market conditions can impact their long-term savings goals.

"That whole mentality ... can be quite expensive to the retiree," says Maehl. "(Preretirees) are always pessimistic because the news is always pessimistic and they're operating within whatever the current environment is."

Dave Gordon, director of advanced planning at Spokane-based Ten Capital Wealth Advisors LLC, says, "I feel like preretirees actually feel more anxiety than the retirees I work with."

Many preretirees have a bleak outlook of reaching their goals to live comfortably in retirement, despite improved readiness and reduced retirement risks in the last five years, according to a report by the Center for Retirement Research at Boston College.

The perception that savings won't keep up throughout retirement doesn't match the data from an annual Gallup survey of economic and personal finance that states 3 in 4 retired Americans have saved enough to live comfortably.

Some financial advisers here say that the disparity between preretirement expectations and the realities of retired life makes sense on the surface, but with modern financial strategies, markets that continue performing at all time highs, and the continued availability of Social Security, the widespread pessimism isn't really warranted.

Gordon says pragmatic retirement expectations are a result of lived experience through multiple economic disasters, but emotional responses make it difficult to see the fact that retirement portfolios historically recover and continue rising with the markets.

"Clients fear losing their money in the markets more than they enjoy the gains that they realized. It's just human emotion," says Gordon.

Kyle Weir, senior vice president at RBC Wealth Management’s downtown Spokane office, concurs and explains that many preretirees can recall when the economy was rattled by 9/11 and the dot-com bust in 2001. Additionally, preretirees have experienced economic losses from the 2008 recession, a market crash in 2011 after the U.S. credit rating was downgraded, the pandemic in 2020, and then rising inflation in 2022 that continues to impact the cost of living, says Weir.

Also contributing to preretirees expectations is a lack of interest in retirement planning, which can lead to to a pessimistic outlook, says Maehl.

"It's just easy to not think about it," Maehl says. "People tend to spend more time planning a two-week vacation than a 30-year retirement."

Preretirees historically have been more pessimistic about their ability to live comfortably in retirement, adds Maehl.

Maehl's observations are consistent with Gallup's survey which found that the negative expectations of nonretired people have persisted since Gallup began tracking this data in 2002. 

Advisers say it's important to note that the source of retirement income is changing for preretirees, however, just because it's changing doesn't mean it's worse.

The three-legged stool, commonly used to describe the three common sources of retirement income—personal savings, Social Security, and pensions—now has one leg short, Maehl explains. 

Pensions have largely disappeared from the equation, says Weir, of RBC Wealth Management, who adds that today's retirees may be living comfortably, however, many people who haven't yet retired don't expect to find themselves in similar circumstances.

Weir explains that current retirees have benefitted from employer pensions that were prevalent while they were in the workforce, as well as virtually no student loan debt, and largely own their homes that were purchased at affordable costs.

Additionally, Gallup's survey shows that Social Security has played a more significant role to support retirement income that retirees previously expected.

"Current retirees have multiple sources of retirement income that aren't necessarily available going forward because of the switch in the culture of pensions versus  401(k)," Weir says. "Between housing debt and student loan debt, it's a different situation for the millennial generation versus the baby boom generation."

Retirement outcomes are improving for American households across income levels and age groups that are more prepared for retirement than they were in 2019, according to a report by the Center for Retirement Research at Boston College.

Retirement risk has improved from 2019 to 2022, according to the Center for Retirement Research's National Retirement Risk Index. Retirement risk has declined 8 percentage points to 39%, down from 47% in 2019. 

Contributing to the bleak financial outlook of preretirees are uncertainties about Social Security remaining available as part of their future retirement income, says Gordon. Longer lifespans also are stressing the system, he concedes, but the program has opportunities to become solvent, he says.

"I'm 42, and my whole life I've been told I'm not going to have Social Security," says Gordon. "I think we'll have Social Security, maybe it's just going to look a little bit different. ... That does play into the psyche of preretirees."

Gordon's clients generally have diversified retirement savings strategies, plus, "wealth to manage," he says, which is an indication that they will be less reliant on income from Social Security to live in comfort, he adds.

"You're definitely seeing more pessimism along the way," Gordon says. "The value of advisers is ... we at least talk about it." 

People who are saving for retirement today don't have to hold onto uncertainties and concerns for their financial future and can alleviate some of their worries by seeking advice from a certified financial adviser, he says.

"We're sitting down on a regular basis to make sure folks are on track," says Gordon. "We can see people through all phases of their life and their financial journey. We hope for the best and plan for the worst."