Americans Deluded about Retirement Prospects

Every once in awhile I run into an article like this one from Yahoo that shows there is a vast difference between what people think their retirement will be like and what their current savings says it will be like. The summary:

More than seven in 10 Americans are either "very confident" or "somewhat confident" they will have enough money to live comfortably throughout their retirement years.

Yet almost half of workers have less than $25,000 -- excluding their primary residence or any defined-benefit pension plans -- salted away for the so-called golden years, according to the 2007 Retirement Confidence Survey released this week by the Employee Benefit Research Institute (EBRI).

I'm not surprised. There seems to be a large gap between expectations and reality for Americans on several financial fronts: debt, savings, investing, college savings and now retirement.

The piece then goes on to give some suggestions on how people should prepare for retirement including these:

1. Crunch the numbers

2. Calculate life expectancy

3. Calculate health expenses in retirement

4. Don't succumb to advertising that promotes spending

I've done all of these. In particular, I set my retirement number a few months ago and continue to save every month towards reaching it. It certainly takes a lot of money to retire the way most people would like, so if you've been ignoring this important part of financial planning, I suggest you get up to speed on your savings options, make a plan, and get going. You may want to start by reading some of my most popular posts on retirement.

Comments

[Minimum Wage]

I am happy to say I have no delusions about my retirement prospects.

(BFG)

[Adventures In Money Making]

hmm...could it be that most people have no idea how to calculate how much they need to save for retirement. Or maybe they just can't count!

[Teri]

Yes, knowing I will need millions to retire (with inflation and everything - I am only 30) - and also with concerns of rising taxes and healthcare in the long run, and not counting on ss or medicare. I have come up with quite a large number. I know for a fact most people my age have not made retirement a priority. I frankly have no idea how they intend to retire when I am worried about making a target that I started saving for very young. I of course factored in the longevity that runs in the family and wasn't too cocky on ROR. So hopefully reality will be far less than I imagine. Preparing for the worst, hoping for the best.

[Suze]

I hear lots of people dismiss retirement concerns with the commment, "I will never retire, I'll just keep working".

That is hardly realistic.

I do wonder how they come up with the stat that half of Americans have under $25,000 saved. I have three retirement accounts, each at about $50,000. If you were were looking at each of these separately, yes, you would conclude I was woefully underfinanced.

The truth is not quite so grim (although I am in the process of beefing up the balance in my current account to make the outlook better).