Americans Think Retirement Savings Going Well, but They Need to Think Again

Here's a great article from Marketwatch that finds a huge disparity between what Americans think about retirement and what they're actually doing about it. It starts with this introduction:

Americans are nothing if not optimistic. Indeed, some one in four Americans are very confident that they will have enough money to live comfortably through retirement. More than four in 10 Americans are somewhat confident, according to one of the longest running studies on the state of retirement in America.

Unfortunately, most Americans have no basis for wearing rosy shades. The future, says the 2006 Retirement Confidence Survey, just isn't that bright. In fact, the Employee Benefit Research Institute, one of the lead sponsors of the retirement survey, says Americans' retirement expectations are like a piece of Swiss cheese -- full of holes.

The piece goes on to list a series of differences between what American's think about retirement and what's actually happening. A few of them that I found especially interesting include:

• Six in 10 workers say they are saving for retirement and four in 10 say they have calculated their savings needs for retirement. Sadly, all that saving and number-crunching hasn't helped all that much; more than half of Americans have less have $50,000 in their nest egg. To be fair, the nest egg value reported in the survey doesn't include the value of a primary residence (estimated to be $160,000 in other studies) or any defined-benefit plans (which fewer and fewer Americans have). But even if you include the value of a house or the value of a traditional pension a good many Americans still won't have enough set aside to maintain their current standard of living.
• Many experts suggest having about 20 times annual preretirement income set aside to enjoy a comfortable retirement. By the way, you shouldn't feel alone if you haven't crunched the numbers yet. Nearly half of Americans (44%) have just guessed how much savings they would need for retirement.
• Many Americans envision working longer as a key part of their retirement-income plan. Again, EBRI says these folks are out to lunch as well. In fact, the study has consistently found that four in 10 workers end up leaving the work force earlier then they planned and mostly for negative reasons -- health problems, disability and changes at their company including downsizing or closure.

Lots to say on this one:

1. I'm way ahead of the average American as far as retirement savings goes -- and I'm wondering if I have enough saved.

2. I haven't calculated my retirement number, but it's on my to-do list for this year.

3. I hope to retire before 65 -- or 62 for that matter -- but we'll need to see how that goes. It's still a ways away and a lot can change between now and then.

4. I realize that saving for retirement may be the second-hardest thing to do in life, but if you have a plan, you can retire well -- and even retire early.

5. Here are more retirement-related posts for those of you who want/need more information:

• Don't Kill Your Retirement Fund When You Change Jobs
• Three Ways to Make Sure Your Retirement Savings Outlasts You
• Have a Hard Time Saving? You Can Amass a Fortune by "Tricking" Yourself

Comments

[EriKZ]

I'm in my mid 30s at I've given up on the concept of retirement. The only time I've ever been hired is when I worked fast food. It's been low paying "Contract" jobs or nothing at all.

Retirement. What a joke.

[Ben]

Then you gotta start! As time goes on it gets more infectious and you actually want to see the results. I've had some big ups and downs and I still prioritize it. I hope things turn around for you.

[brett]

I find the results both VERY disturbing and internally consistent.

DISTURBING -- those of us who DO save will be increasingle taxed (god forbid a wealth tax ever come into existence) in order to support the morons who do not save.

INTERNALLY CONSISTENT -- 4 of 10 are reported to be "somewhat confident" while "four in 10 say they have calculated their savings needs for retirement". The survey summary seems to imply that reality differs from perception, but I think there is actually a subset, somewhat less than 50%, that is aware of retirement needs and managing them, as well as a slight majority that is clueless. It's those clueless people that disturb me (see above). Can we just kill them off or do we need to take care of them because life is precious?

[Fred]

Its hard to save when the average american's debt is increasing two fold. Credit card debt is out of control and people are buying homes at costs at much more than they can afford. Everything from no-interest loans to 40 year loans will cause americans to work much longer than they think they will have to. It is a "must have now attitude" that might cripple our national economy in years to come. It will be these same people who will then say the government owes them something and expect them to bail them out. What is even more scary is that probably over 80% of the people are not prepared for long term injury or lost jobs. These things are even worse on families. Life is a crap-shoot, so we need to start having alternative plans that will make life easier in the long term. Having expensive houses and cars now does not make it any easier now than having an affordable home and car. It can happen, we are putting away approx 20% of our income to savings and retirement while having disability insurance to cover the unthinkable injury. We will have our house paid off in less than 15 years since we purchased it new. All this in one income and having two children. We are not rich, however, we do not have such luxuries as cable TV, driving SUV's, or eating out 2-3 days a night. Our life is simple, but not poverished. We count our blessings everyday...and we pray that many other will be able too.