Here's a piece from Marketwatch for the "which numbers do I believe" file. First, here's the bad news:
Consider, for instance, last week's news that Americans in their 60s saving for retirement in a 401(k) plan had 5% less in their accounts in 2004 than in 1999. The average 401(k) account balance for someone in their 60s was $136,400 at year-end 2004, down from $143,161 at year-end 1999, according to a study released by the nonpartisan Employee Benefit Research Institute and the Investment Company Institute.
And if that wasn't bad enough, the 2004 account value included a worker's annual contributions over the five-year period. Imagine a 60-year-old in 1999 hoping to retire at 65 in 2004 crunching the numbers way back when. "If I sock away the maximum possible, including catch-up contributions, I should have close to $200,000 in my nest egg in five years. And that doesn't include what I might have if the market rises a conservative 6% per year. If the market goes up, I should have about $250,000 in my 401(k) account."
Well, fast forward five years. That now 65-year-old worker has had to readjust plans dramatically. Instead of having a cool quarter of a million dollars set aside for retirement, there is now less than what there was when they were a sprite 60 years old. They, in effect, have run in place for five years.
And now they have to turn to Plan B. And Plan B is likely to include a few at one time unimaginable options. Instead of retiring, they may have to work longer. Instead of retiring in comfort, they may have to trim back their expectations.
Ouch! That IS bad news. But don't believe it (at least not yet). Here's some contrary information:
But that was last week's study. This week, the blizzard of studies about retirement paints a different -- in fact, optimistic -- picture. For instance, one study suggests that many white-collar professionals earning between $81,000 and $100,000 plan to work in their retirement years not out of need, but out of want.
More than one in two Americans (53%) say they want to keep working just to stay active and engaged. To be fair, some 43% say they want to stay active and they need the money. But only 6% plan to work solely for financial reasons after they hit retirement age, according to a Lee Hecht Harrison survey.
And just when you thought you understood what was going on, here's another study:
And then there's the Allstate Reality Check study. It paints a picture which in some ways is so dramatically different from other surveys that it's hard to believe. Consider its findings:
Those surveyed say they are disciplined (87%), educated about investments (71%) and good savers (78%). What's more they say they frequently shop around for the best deals (92%) and they seldom regret the things they buy (20%).
In addition, more than 90% of those surveyed said it "feels good" to save money, regardless of age, gender, income, education or region of the country. And 93% said it is "important" to save for retirement.
So what's the truth? My bet is that this is closest to what's actually happening:
Of note, the national savings rate, which doesn't include 401(k) contributions, is -- to be generous -- zero. So, while lots of people say it feels good to save, they don't. And while, lots of people say it's important to save for retirement, they don't.
Consider some other highlights from the study which might be more realistic: More than one in two Americans (51%) either dread or have some apprehension about retirement. In addition, 92% of Americans with household income less than $55,000 have 401(k) account balances with less than $100,000. And 72% of all Americans, regardless of age, gender, income and education, have 401(k) account balances with less than $100,000.
So why all the conflicting information? Money. Business are trying to make money and using surveys to do it. Here's the scoop:
Well, part of the answer lies in the motivation for such studies. Many studies, especially those produced by financial-services firms as well as academicians, are partially self-serving. They exist, it seems, to strike fear in the hearts of unsuspecting Americans.
We are told that we aren't saving enough for retirement without the disclosure that saving more would result in more fees and revenue for financial-services firms doing the research. We are told that we will outlive our assets without the disclosure that buying lifetime-income products would result in more fees and revenues for the financial-services firms doing the research.
Still, there may be some truth in these studies. In fact, all of them contain at least some bit of truth.
The bottom line is that you have to be responsible for your own plan regardless of what's going on with everyone else. And don't try to make yourself feel better by thinking "well, I'm doing better than most folks." Most folks are going to be very poor based on how they are saving for retirement. So are you going to be happy being better than them and "only" being kinda poor in retirement? Of course not.
Run the numbers, develop a plan on what you need, and implement it as soon as possible. In this way you'll know what your retirement will hold even if the crowd is caught up in trying to determine whether or not they can make it through retirement as they want.
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