Question Of The Month – January,  2010

Are You Ready For Retirement?

 The Retirement Confidence Surveys  survey suggests that many American workers are not ready to undertake the task of financial planning for their own retirement and face the prospect of having to work far longer than they expect.

 Ø   Who saves:  The proportion of workers saving for retirement continues at 7 in 10 (70 percent), while those who report having attempted to calculate their savings needs for retirement remains at 42 percent. One in three workers ages 35 – 44 are not setting aside any money for retirement.  Among those ages 25 – 34, 45% are not saving. 

Ø   Modest savings: Thirty-nine percent of workers report they have saved less than $25,000 for retirement ---- sixty-one percent report they have saved less than $50,,, for retirement.   However, the large majority of workers who have not put money aside for retirement have little in savings at all: Three-quarters of these workers say their assets total less than $10,000 (75 percent).

Ø      Expected benefits unlikely to materialize: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 40 percent of workers indicate they or their spouse currently have a defined benefit plan, yet 61 percent say they are expecting to receive income from such a plan in retirement.

Ø      Unrealistic replacement ratios:  While a majority of workers say they prefer a standard of living in retirement that is the same or better than in their working years (59 percent), half think they can maintain a comfortable retirement on 70 percent or less of their pre-retirement income (50 percent).

Ø      Ability to keep working? . The average retiree today retired at age 62, but the average worker expects to retire at age 65. At the same time, workers are more than twice as likely to expect to work for pay in retirement (67 percent) as retirees are to have actually worked (27 percent).

Ø    Some confidence levels not realistic: The RCS continues to find that one-quarter of workers are very confident about their financial security in retirement (24 percent), while more than 4 in 10 are somewhat confident (44 percent). Twenty-two percent of very confident workers are not currently saving for retirement, 39 percent have less than $50,000 in savings, and 37 percent have not done a retirement needs calculation