Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOR
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Retirement
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Retirement

The Journal of Retirement

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOR
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

The Unrealistic Optimism That Threatens Retirement Security

Alfred Rappaport
The Journal of Retirement Fall 2019, jor.2019.1.056; DOI: https://doi.org/10.3905/jor.2019.1.056
Alfred Rappaport
is Leonard Spacek Professor Emeritus in the Kellogg School of Management at Northwestern University in Evanston, IL
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 

Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

The US is facing a retirement crisis. Almost half of all American families have no retirement savings. A disturbingly large number of investors think they are on a path toward a comfortable retirement, but they are unlikely to reach their destination due to their unrealistically optimistic growth forecasts for their retirement savings. This article examines the sources of this unwarranted optimism. First, some investors forecast savings growth rates that assume they will reinvest dividends, but they do not. Second, investors earn lower rates of returns than the mutual funds they invest in. Third, they fail to properly account for the costs associated with investing—inflation, expense ratios, and taxes. Investment professionals are very familiar with how these factors work against accumulating savings. Much less attention, however, has been directed at how overly optimistic forecasts of these factors threaten retirement security. This article examines these issues. In addition, the article shows how properly incorporating the factors into retirement plans enables retirement savers and financial advisors to make the timely changes needed to prevent a retirement nightmare.

TOPICS: Wealth management, retirement, pension funds, portfolio theory

Key Findings

  • • A majority of polled workers express optimism about their ability to finance a comfortable retirement, but those who forecast an overly optimistic savings growth rates are unlikely to reach their retirement goal.

  • • The principal sources of overly optimistic savings growth rate forecasts include bullish market return forecasts, failure to reinvest dividends, underperforming the equity funds that the investors invest in, and a failure to properly account for inflation, expense ratios, and taxes.

  • • Prospects for achieving retirement savings targets improve with a combination of better forecasts of the factors affecting the savings growth rate, avoiding poor market timing, and lowering expense ratios with low-cost index funds.

  • © 2019 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
Next
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Retirement: 10 (3)
The Journal of Retirement
Vol. 10, Issue 3
Winter 2023
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Retirement.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
The Unrealistic Optimism That Threatens Retirement Security
(Your Name) has sent you a message from The Journal of Retirement
(Your Name) thought you would like to see the The Journal of Retirement web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
The Unrealistic Optimism That Threatens Retirement Security
Alfred Rappaport
The Journal of Retirement Oct 2019, jor.2019.1.056; DOI: 10.3905/jor.2019.1.056

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
The Unrealistic Optimism That Threatens Retirement Security
Alfred Rappaport
The Journal of Retirement Oct 2019, jor.2019.1.056; DOI: 10.3905/jor.2019.1.056
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • DIVIDEND REINVESTMENT
    • THE INVESTOR RETURN GAP
    • INFLATION
    • EXPENSE RATIO
    • TAXES
    • CONFRONTING UNREALISTIC OPTIMISM
    • CONCLUSION
    • ACKNOWLEDGMENT
    • ADDITIONAL READING
    • ENDNOTE
  • Info & Metrics
  • PDF

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
reply@pm-research.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2023 With Intelligence Ltd | All Rights Reserved | ISSN: 2326-6899 | E-ISSN: 2326-6902

  • Site Map
  • Terms & Conditions
  • Cookies
  • Privacy Policy