Mark Twain may have been right when he quipped that all a person needs in life is ignorance and confidence. But when it comes to successfully navigating retirement, that’s playing a dangerous game.

Many Americans make a lot of assumptions about retirement, from when they’ll finally leave the job to when they’ll claim Social Security, according to new research from J.P. Morgan Asset Management. That’s mostly a good thing, because planning for retirement requires a lot of forethought and careful financial and behavioral preparation. The problem is that many people seem to be working from faulty premises, starting with the belief that retirement is a one-time event that can be carefully orchestrated according to one’s personal wishes. In reality, retirement is more of a journey than a one-time event, with timing that can vary widely due to factors not entirely (or even partly) within the individual’s control. That’s why the research compares the experiences of current retirees with the expectations of savers, while highlighting the important role that financial advisors can play in helping their clients cut through the noise.

“Retirees can offer a valuable reference point for [those people] still saving,” said Michael Conrath, chief retirement strategist for J.P. Morgan Asset Management. “This year’s survey highlights several disconnects between what people expect and what retirees actually experience.”

Perception vs. Reality

Perhaps the biggest faulty assumption baked into many savers’ expectations about retirement pertains to timing:

• Just 28% of workers polled expect to retire before age 65, while 33% expect to work until they are 66 or older.
• But 68% of current retirees left the workforce before age 65, with half retiring sooner than planned due to health issues, job loss or other factors.

These gaps suggest that many people are overestimating how long they might actually remain in the workforce, which can in turn cause a false sense of security about one’s true retirement readiness. Even simple math shows retiring at 62 versus 65 requires a significantly larger nest egg, all else being equal.

What drove people from the workforce? Nearly 3 in 10 stopped working for health reasons, but financial readiness also played a role, with 25% saying they were able to afford retiring sooner. However, many point to job-related factors, including workplace dissatisfaction (24%), job loss or layoff (21%), stress or burnout (20%) or an early retirement offer (14%).

Social Security Uncertainty. Working baby boomers’ expectations about Social Security claiming are likewise divorced from their retired counterparts’ reality. While nearly two-thirds of retirees started claiming Social Security at age 65 or earlier (including nearly 1 in 3 who began drawing benefits at age 62), nearly two-thirds of younger working boomers (65%) expect to wait until 66 or beyond.

We’ve all heard the saying: If you wouldn’t want it splashed across the front page of tomorrow’s newspaper (or The Daily Upside newsletter), it’s probably best not to say it at all.

The same rule applies when it comes to sharing sensitive estate planning information with general-purpose AI chatbots. It may seem like a harmless exercise to run one’s trust-funding strategy or family business succession plans past the likes of Claude or ChatGPT, but doing so can actually subject that information to future discovery if the plan is challenged in court, according to a team of specialist attorneys at ArentFox Schiff. So advisors and their clients should utilize extreme caution when utilizing public generative AI tools as part of the estate planning process, especially in situations where a lot of wealth is at stake or a future estate dispute seems likely.

“It’s fraught with risk when we recklessly invite AI into the attorney-advisor-client relationship,” said Sarah Kerr Severson, a partner on ArentFox Schiff’s private wealth and tax planning team. “There’s no attorney-client privilege there. Courts have already confirmed that.”

Risk Alert

Back in February, a federal judge in New York issued a bench ruling holding that documents prepared using generative AI were not protected by attorney-client privilege or the work-product doctrine, a lesser-known legal rule that shields materials prepared in anticipation of litigation from discovery by an opposing party. The decision highlights the risk of using public-facing AI tools in legal matters, Kerr Severson said, particularly when such tools are used outside the direction of counsel and lack confidentiality protections traditionally afforded to attorney-client communications and other privileged materials.

“A client’s AI searches and documents do not constitute protected communications between attorney and client,” Kerr Severson said. “The privilege requires a trusting human relationship between a client and a licensed professional who owes fiduciary duties to the client and is subject to discipline if the duties are breached. Anything typed into AI chatbots should be assumed to be searchable, traceable and usable in a court of law.”

That matters for a variety of reasons:

• Clients’ private thoughts about their heirs, assets and estate mechanisms like trusts and wills could become public record.
• Even if the exposure doesn’t result in adverse legal consequences, it could nonetheless be embarrassing or otherwise harmful to family relationships.

Best Practices. This isn’t to say that generative AI shouldn’t play any role in estate planning whatsoever, Kerr Severson was quick to add. It can be very effective at educating clients about key concepts and vocabulary, for example. “The best practice is to keep things general,” she said. “Don’t use client names. Don’t use names of beneficiaries. Don’t put in a specific description of family assets or dollar amounts. Don’t use general AI models to create summaries or flow charts of the estate plan. Again, all of that could be discoverable.”

Remember when gas was under $4 a gallon and you could take the family out to eat without taking out a second mortgage? Ahhh, those were the days.

As the cost of living rises, everyday expenses are eating into retirement savings. Americans currently participating in workplace retirement plans anticipate needing $1.2 million on average to retire comfortably, according to a Schroders survey released this month. However, just 30% believe they will reach $1 million due in large part to rising costs, debt and competing expenses. In fact, a third of those surveyed said they have more credit card debt than retirement savings. There are also signs that wealthier clients are feeling the squeeze. It’s a great chance for advisors to help clients prioritize spending to stay on track for retirement without overextending their resources today.

“While many are still contributing to retirement, they’re finding it harder to increase their savings each year,” said Nathan Sebesta, an advisor at Access Wealth Strategies. “Retirement savings shouldn’t simply be what’s left over at the end of the month. It should be treated like any other essential bill.”

Hands Off My Starbucks Latte

Lifestyle creep comes for us all, even the wealthy, said Bryan Byrer, founder of Millennial Financial Planning. “Just because people make a lot of money doesn’t mean that they’re always good at saving it.” Even if they’re making a high income, if their expenses are leaving them living somewhat closer to paycheck-to-paycheck than others, rising prices will certainly come into play. “They’re definitely going to feel that more than someone else who has a higher margin of savings,” he said.

Clients looking to rebalance their expenses can start with eating out: full-service restaurant prices have risen almost 4% since last June, according to the Consumer Price Index. “So many people eat out more than they really know they should or need to, and especially as the cost of goods goes up, that is more impactful than like the silly trope: ‘Get rid of your Starbucks latte,’” Byrer said.

He also highlighted a few other strategies:

• As the housing crisis deepens, renting longer may be a better choice than buying in the near term.
• One client found hiring an au pair was more cost-effective than daycare.
• Paying off credit cards daily lets clients earn points while always knowing their true bank balance.

TIPS of the Iceberg. Even for those whose savings are on track, rising costs have made clients far more focused on earning returns that outpace inflation, said Gautham Jain, president of Jain Wealthonomics. That’s reshaping asset allocation and retirement income strategies: risk-averse investors are turning to Treasury Inflation-Protected Securities and risk-tolerant clients are increasing equity exposure and using TIPS in place of traditional cash-like assets. “This was not a viable factor for most clients when inflation remained low,” said Jain.