Many Americans are wrong about their financial preparedness retirement. But according to a new report, overconfidence is higher among the wealthy than among others.

Twenty-eight percent of all American households have too rosy a view. They think they are well on their way to maintaining their standard of living in retirement, but in reality they are at risk insufficientaccording to art analysis Center for Retirement Research at Boston College.

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The analysis examines these households by income group. 32 percent of high-income households are “not worried enough” about retirement risk, a higher proportion than 26% of low- and middle-income earners.

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The divergence between perception and reality can be dangerous, experts said. Such households may save more money during their working years, but they do not know that they should do so.

“If they don’t realize they should save more, they risk having to cut back on their consumption — perhaps substantially — in retirement,” said Anqi Chen, a senior research economist and assistant director of the Savings Research Center at Boston College. .

They may also be unable to manage some of the risks of old age, such as higher health care costs, added Chen, who co-authored the report.

Here’s an important caveat: The meaning of “at risk” varies between income groups. Low-income earners who are at risk may not be able to afford basic necessities in old age, while a wealthy household, for example, is unlikely to fall into poverty, the analysis said.

The wealthy risk a “difficult adjustment that may require them to lower their expectations for their retirement lifestyle,” the report said.

The analysis uses data from the Federal Reserve System Survey of Consumer Finances, three-year assessment of households. Its latest iteration reflects 2019 data.

The survey defines income groups by age and marital status. For example, the 2019 survey defines married couples ages 45 to 47 as low-, middle-, and high-income couples if their median income is $50,000, $110,000, and $248,000, respectively.

The Center for Retirement Age Research uses survey data to construct the National Retirement Risk Index. The index models retirement readiness by a range of assets, such as Social Security, pensions, home equity and employer-sponsored retirement plans such as a 401(k).

In 2019, according to the index, 47% of American households were at risk of not maintaining their standard of living in retirement. This is slightly less than in the years following the 2008 financial crisis, but is up significantly from the beginning of this century.

Many factors have pushed Americans’ readiness for retirement.

First, they are live longerwhich means their savings must stretch over a greater number of years.

Booming stock and housing markets can provide an “illusion of wealth” to wealthy households which they disproportionately own these financial assets, Chen said.

For example, the median price of a home sold in the U.S. jumped to $327,000 by the end of 2019, from $223,000 in early 2010, according to federal data watched by the Federal Reserve Bank of St. Louis. The S&P 500 roughly tripled in that time.

Further, about 24% of wealthy households that underestimated their retirement risk had a high housing debt-to-equity ratio, according to an analysis by the Center for Retirement Research — three times more than middle- and lower-income earners.

Social Security also replaces a smaller portion of annual income for wealthy households compared to other income groups — meaning they have to save more money to maintain their standard of living.

Saving money is the one thing that “dramatically improves” a household’s retirement readiness, Blanchett said.

Aside from the obvious benefits of a larger pool of assets to draw on in old age, saving more money today effectively lowers a person’s standard of living, Blanchett said. More money saved means less money spent, and households get used to living on a lower monthly budget — a lifestyle change that would likely carry over into retirement, he added.

The easiest way for households to get a rough idea of ​​their retirement readiness is to consult two or three free online retirement calculators and enter all relevant financial information, Blanchett said. Someone who wants a more detailed examination or a personalized plan might want to consider consultation with a financial plannerhe said.