There's a dangerous gap between how long Americans expect to live and how long they think their money will last. According to new data from life insurance technology company Ethos, Americans expect to live to age 88, yet believe their retirement savings will only stretch to age 83. That's a five-year shortfall that could prove catastrophic for millions of retirees. And for those without any retirement savings at all, the picture is even bleaker: 47% expect their money to run out before age 80, compared to just 17% of those with savings.
The primary culprit behind this planning disaster is long-term care costs—a category that most Americans dramatically underestimate. Survey respondents guessed that a nursing home stay costs an average of $60,829 per year. The reality, according to the Federal Long Term Care Insurance Program's 2024 cost of care survey, is nearly double that figure at $112,420 for a semi-private room. This 54% gap between perception and reality reveals a stunning blindspot in retirement planning. When respondents were shown the actual figures, their confidence in affording to live to age 80 plummeted across every generation. Gen Z saw the sharpest decline, dropping from 61% to 51%, while baby boomers fell from 67% to 62%.
Making matters worse, many Americans don't understand the retirement accounts they're relying on. Among respondents with a 401(k), 40% expected the account to provide a monthly paycheck for life—a feature traditional 401(k)s do not automatically offer. That figure climbed to 48% among those who identified a 401(k) as their primary retirement savings vehicle. These misconceptions suggest that millions of people are approaching retirement with fundamentally flawed expectations about how their money will work.
There is some encouraging news, however. A substantial 66% of respondents said they would prefer a smaller guaranteed income stream for life over a larger retirement balance that could eventually run out. Another 33% said they would convert roughly half their retirement savings into guaranteed income if given the option, and 29% would convert a quarter. This preference for certainty suggests Americans understand the psychological and financial value of guaranteed income—they simply aren't currently accessing it.
The solution is clear: policymakers and financial institutions must do more to educate Americans about actual retirement costs, particularly long-term care, and to make guaranteed income products more accessible and appealing. The current situation leaves millions facing a potential five-year financial cliff with little awareness of the danger ahead.