Are You Confident You Can Retire?

Here's a piece from CNN Money that says most Americans think they won't be able to afford retirement. The details:

• Only 13% of workers surveyed said they "feel very confident" that they will be able to retire comfortably — less than half the percentage reported in 2007.
• Nearly half -- 49% -- said they were "not too" or "not at all" confident.

And here's why they aren't confident:

A large chunk of the workers surveyed have little or no retirement savings. Of those who provided estimates, 57% reported household savings and investments of less than $25,000, which included 28% of respondents who said they had less than $1,000. Only 24% reported savings of $100,000 or more.

Debt is standing in the way of saving. More than half of workers reported having a problem with their level of debt, while only about half of those surveyed said they could definitely cover $2,000 worth of unexpected expenses within the next month.

The survey results were from over 1,200 Americans 25 and older, so take some of this with a grain of salt. After all, no savings at 25 is much different than no savings at 65.

Come to think of it, I didn't have much savings at 25 myself. I graduated from business school at 24 and really hadn't had much time to save anything. Oh yeah, and I bought a brand new car as well. That added some instant debt to the situation.

Fortunately I've made some better choices since then and I'm feeling fairly confident that I can retire. In fact, I'd say:

• I feel completely confident that I can retire at 67 and have enough money available.
• I am fairly confident (I'd say 75% confident) that I will be able to make early semi-retirement work within the next 10 years.
• I think it's a 50-50 shot that I can take early semi-retirement work within the next five years. My main issues: I have one major expense ahead of me (kids going to college) and haven't yet solidified my real estate holdings to the point where they provide enough income for me to live on (in order to have the safest retirement.)

How confident are you that you'll be able to retire on time or even early?

Comments

[mb]

If you haven't seen Obama's new budget, you should be least confident about the government and taxes. Obama has determined that anything over 3 million in your retirements accounts is excessive and you need to give more to the government. I have said it before, I will say it again - government is the biggest threat to my retirement - 401(k)s are a big pot of money and greedy politicians know exactly how much is there - they are not safe.

[Matt]

I feel confident I can retire it is a matter of the year. If I retire at 67 it would not be a problem.I don't want to wait that long. If I semi retire earlier then the confidence level lowers due to the fact that I will be drawing on the retirement funds.

My goal is 59 1/2 ( you have to have some sort of goal) but unless the economy improves, job created, government intrusion lessens, and other fators I have no control over, becasue these are the things that reduces my confidence level to retire early.

[Manette @ Barbara Friedberg Personal Finance]

I am confident that I can retire in 10 years. Our projection says that we have sufficient retirement savings by that time. Likewise, our children's college educational fund will be completed in 5 years... but I won't. I may continue with my stocks trading activities ans real estate investments as well as writing posts for my blogs. I enjoy doing them and I would like to keep myself busy.

[Jason]

I'm confident that we'll be able to retire at 55 (17 years from now) IF as has been said, the government stays out of it. That 3 million mark is the cincher as our plan is to have more than that. Sitting at just above 500k right now, maxing out 401k and IRA contributions, putting $500 a month into DRIPs, and setting another 2-3k a month aside into cash for now to invest in REITs or some other vehicles. Main issue is to ensure we have enough set aside in non-retirement accounts since we plan on retiring early.

None of our retirement planning involves social security or my military pension that will kick in at 58 1/2. Those will just be gravy.

All of this is easier for us to accomplish as we've reached fairly high levels in our fields for our age (both 37) and we don't have children. I'm sure that 55 would be more like 60 if we had kids at the very least.

[KJ]

My husband and I are 27. There's still a lot of time before retirement for us. Right now, I'm confident we'll be able to retire. The big question is at what level of lifestyle. We both would like to travel and not have to watch every penny to afford food.

[Old Limey]

Here's a perspective from an elderly married couple that retired in 1992. It contains some comments that are very true but not applicable to most of today's future retirees.

1) In my working years in the USA from 1958 to 1992 there was a strong demand for jobs for engineers, particularly aerospace engineers. This was primarily because we were in an Arms race with the Soviet Union. The arms race ended in 1991 when the USSR broke apart and the Cold War ended.

2) Worker pensions were the norm in our days and we both received one when we retired.

3) University tuitions were very low indeed by comparison with today, junior colleges were tuition free in many cases, and many employers paid for, and encouraged their workers to take university classes by allowing them to have flexible work hours and make up the time.

4) We had raises every single year, in my case they varied between 5% and 10%/year.

5) We had an incredible stockmarket, particularly the NASDAQ between 1992 and March 2000 when the DOT.COM bubble burst.

6) In Silicon Valley land was very cheap and new subdivisions were springing up all over. A weekend pastime was going around looking at model homes and picking up brochures. We bought our first home in 1963, a brand new 4Br, 2Ba ranch style home on an 8,000 sf lot for $26,950. The home I should have bought was a far nicer home in a prestigious development for $34,500. We had the money to be able to afford it but we wouldn't have been able to buy all the carpets, drapes, furniture etc and landscape it. The one I should have bought rose greatly in price compared with the one I bought, which we sold for $90,000 in 1977. With our second home we were the second owner, paid $107,000 and today it would sell very quickly for about $1.3M. Realtors come by every week asking if we want to sell.

The bottom line is that we were incredibly lucky and have only recently started taking money out of our investments because our taxes have gone up a lot because we have to take large distributions from our IRAs. We have fulfilled all of our dreams, had a great life so far, and will be leaving lots of money as well as two properties to our children.

[JimL]

I a 49 and my current projections say that I could retire at 56. I agree with MB that Jason that the government could be our biggest fear. Similar to what FMF has said in the past, I do not count on Social Security. I also don't count on Medicare as it has a much bigger funding problem. Early proposals are on higher costs for higher income earners and we are likely to see additional means testing in the future. The latest proposal from Obama also scares me when we see the door has been opened towards limiting the amount we have in our retirement accounts.

[rick]

The math for real estate investors is simple. The average American should spend 25% of their income on housing. To replace 100% of your income you need 4 (4x25%=100%)free and clear houses of the type which you would live. You also should have one more to cover vacancies, insurance, taxes and maintenance costs. As an additional cushion pay off your personal residence and you have a fully funded inflation proof retirement plan so long as your city does not pull a Detroit and loose population. Granted this is only semi-retirement as you need to collect 5 rent checks every month and handle the occasional repair, but it beats working.
The only problem is once you get going it is tough to stop at 5 properties because buying and renting out properties is fun. Kind of like Monopoly with real money.

[freebird]

"survey results were from over 1,200 Americans 25 and older, so take some of this with a grain of salt."
Good point, here's another poll taken among boomers, who should be mostly in their home stretch:
http://www.bankrate.com/financing/retirement/what-does-it-take-to-retire/
Not as dire as the numbers above but not plush either. On the other hand many boomers will have some level of defined benefit pension income, and adding this plus social security, probably comes close to median household income on average.

As for me, I'm ready now, but hanging on for one more year because my employer didn't accept my resignation. Not that I need the retention bonus, just that they've been good to me throughout my career and it was enough to show that they seriously do want me around. But I won't be working past my 50th birthday no matter what's on offer.

[Lance @ Money Life and More]

I'm rather early in my career, only in my mid twenties, so I'm sure there are a ton of unknowns. If I can keep up my current habits though I'll definitely be set for retirement!

[Jonathan]

Yes, and early. How early? I don't know. We are working on replacing our salaries with rental income (which I call "passive" income even though I know a lot of people would disagree with that). At 28 we are at the point where our basic living expenses would be covered, but with little margin for error. Plus, our W-2 income is in high-growth mode still so each year it would become harder to give up. Also, we have made charitable giving a priority for years (in part to ensure that it's a priority in the future when we have more means) and actually give away more than the passive income we bring in. I know this is correlation rather than causation, as they say, but so far the more generous we've been the more we've been blessed. Or maybe it's the other way around.

Anyway, I expect that we will have the option to "retire" (that is, give up W-2 income) comfortably within 10 years, but it's unlikely we will choose to do so that early.

[Jason Jones]

Honestly I think that is a tricky one.

You would like to think that if you are financially responsible, work hard, and don't waste all your money that you will be able to retire on at least a semi-comfortable basis.

But the fact is that the world seems to be drifting in a direction (financially speaking) that somewhat puts the lie to that idea.

Take Cyprus as a example. You could have saved all your life. And then BANG.... Out of the blue the Government steals 40% of all your savings over 100,000 euros.

Now that genie is out of the bottle who knows what the future may bring.

I don't think anyone can feel that confident about their retirement income when it can so swiftly and arbitrarily be taken away by governments who need new income sources to patch up their own black holes.

[Mc]

Sure, I think I will be able to retire..not now, but in 10-15 yrs or so when I'm in my 60's. The stock market even came back, so I'm in a good place. I'm always been a very conservative investor and consumer so even another stock crash there is no chance I would end up destitute. I also know from growing up poor that I can live well on very little if I need to...so I am not too anxious about the future. No I wont live like rap star, but I'll do fine.

It seems ridiculous to me to worry that the US government will take stuff away from you....seriously, the chances of this happening are about the chances of winning the lottery: youre much more likely to be run over and killed by a car just going about your business today than that. The US government is not Greece, Italy, Spain or Argentina by a long shot. Those places have been flagrently corrupt and fiscally unsound for at least the past 60-70 years, with almost no one paying their taxes and their basic government and business contract law enforcement being significantly non functional for decades. You only have to read a bit of history (or be close friends or be related to people living in these countries) to realize the situation in those countries has never been like in the US and their economic culture is quite distinct.

There's a lot of scary stuff on the internet and tv because its click bait and gets attention, but you cant believe everything you hear and you have to consider the sources of what you hear, and especially their conflicts of interest---why are all the doom and gloom prophets enormously rich themselves, with their $ in conventional assets? Are they practicing what they preach? Always be a skeptic is my motto. Even in WWII (when there was serious rationing of food and critical materials like rubber, steel, cotton, wool, nylon, etc) and under FDR who was an overt socialist, US bank accounts and property were never in danger of confiscation.

I'm more impressed by Warren Buffet who is literally an investor, than alarmist financial commentor guys who are all over tv and the internet, but who when pressed say they are really just "entertainers" and who wont stand behind their "advice", citing legal disclaimers. There is no sure "get rich quick", but its pretty clear that anyone can do decently following solid non glamourous financial rules like "grow your career, "spend less than you earn"' and "educate yourself about the real risk and rewards before you invest".

[BD]

I'm too poor to ever retire. I just hope I'll die soon. Not being morbid...it's just the way life is.

[Money Beagle]

I'm confident that I can retire at the age when Medicare kicks in, but not too confident about getting out anytime before that, given the cost of health care, and that it will only likely continue to go higher over the next 30 years or so.

[getagrip]

With the company match I've always managed about 10% saving for retirement so I've always been on track to be able to retire in some form or fashion in my mid to late sixties. I've learned more, bumped up the savings to close to 20% over the last decade or so, and feel I'm closer to late 50's early 60's now. I've always felt the timing was a window, not a specific date or age. I also hope that I'll be able to make it a choice, and not have it forced upon me.

That said, I've seen people have to adjust their date earlier to later for all kinds of reasons like: raise their grandkids, get a huge windfall, spouse passing early, just re-odering their priorities in life, etc. So I don't feel there is ever any absolute certainty. You plan, you adjust, you keep living.

[jim]

I'm very confident I'll be able to retire at regular retirement age around 65. I'm pretty sure I could retire earlier around 55-60. I might be able to retire around 50.

[jim]

MC is right, theres no reason to get panicky that Obama is going to seize your retirement account. Thats just politically biased fearmongering. This idea that Obama wants to take your IRA/401k money has come up a few times over the years. And the USA is certainly nothing at all like Greece or Cyprus.
You need to stop believing everything you read in the internet or hear on conservative talk radio. There isn't a single elected politician I know of in DC today that advocates seizing assets of US citizens.

[SteveD]

I am confident that I can afford to retire within 10 years, before I turn 50. I dove head first into the real estate market during the peak of the panic in 2010, and it's paying off better than expected.

That said, I took a year off when I was 31 to travel around the world, and I realized that I need things to do in life more than self-indulgence, so I want to save enough to continue my real estate adventures and start other businesses after I quit high tech corporate life.

I am extremely lucky to have a good education, good job, good real estate team, and to read FMF regularly!

And I agree with MC and jim -- the media and politicians survive by selling fear, but the most successful people are those who rise above that noise, plan, and take smart risks.

[JimL]

Jim,

It is not fearmongering from the internet or conservative talk radio show. Obama will be submitting his budget this week and one of his proposals is to limit the amount you can put in your retirement accounts. The current proposal is to have a $3 million limit. If you live in a high cost area, that is not a huge amount of money if you factor in a 4% withdrawal rate.

You can read about it here:

http://www.bloomberg.com/news/2013-04-08/romney-s-ira-obama-target-for-revenue-with-3-million-cap.html

Bloomberg is NOT a conservative website (it leans liberal).

Additionally, there seems to be a common theme to have the "rich" pay more for their Medicare. Means testing has been a concept that has been brought up by both Democrats and Republicans.

We already know that the current paths of Social Security and Medicare are not sustainable. It means that we will either see smaller benefits, higher taxes, or a combination of both. To not plan accordingly, would be foolish, in my opinion.

[Sarah]

The $3 million is just a cap on what you can contribute to deductible retirement accounts. The government's not going to seize assets you accumulate above that...it just won't let you put them in a tax-advantaged account.

I think most people more than about 10 years out from their planned retirement who are confident they'll be able to do it don't have a realistic sense of the vicissitudes of life they may be exposed to in the meantime. You're on track now. What happens when the stock market crashes again (odds are it will), if you lose your job, if you/your spouse unexpectedly gets pregnant, if you have a serious illness/injury (which, by the way, will turn "passive" real-estate investment into something a lot harder), if the current provision for retirement accounts changes significantly (reasonably likely)...? There are just too many possible twists and turns.

There were a ton of folks who were convinced they could retire in the next couple years back in 2005...

[JimL]

Sarah,

No one said the government was going to seize the assets above the $3 million. However, the proposal is to have a cap. For those that have over that amount or tracking towards it will need to have a plan to alter their forecast if this gets traction. The other scenarios you mention are always possibilities and are a good reason to have a sufficient emergency account (job loss, illness, pregnancy, etc.).

The point is that given the state of our countries finances, it would be wrong to ignore this impact on our expected retirement scenarios.

[DW]

As someone who works in an industry that's being restructured (read outsourced and consolidated), I expect to be "retired" at any time. Health care is the wild card ... but semi-retirement is quite do-able now at 58, even better at 60.