If you're like most Americans, you might hope to have a comfortable retirement, but you probably haven't done what you need to do to make that happen.
The most recent survey showed that many Americans' plans for retirement are as full of holes as a piece of Swiss cheese. For example, many people have only saved a small amount for retirement because they don't know how much of their pre-retirement income they'll need in retirement. They also haven't thought about how much money they'll need to live comfortably once they retire.
The Retirement Confidence Survey (RCS), which has been going on since 1991, is the most well-known and thorough study of how American workers and retirees feel and act about saving, planning for retirement, and long-term financial security. The Employee Benefit Research Institute and Matthew Greenwald & Associates are the ones who paid for the survey.
Here are a few of the results of the survey:
Saving: More than two-thirds of current workers (68%) say they and their spouses have less than $50,000 saved for retirement.
Costs of health care: Almost six in ten workers (58%) say they and their spouses do not expect to get health insurance from their employers when they retire. Recent EBRI research showed that a person who is 55 and lives to be 90 would need to have saved $210,000 by age 65 to pay for insurance to supplement Medicare and out-of-pocket medical costs in retirement. This is far more than what all but 10% of workers have saved for all of their retirement costs right now.
Longevity: Two-thirds (66%) of current workers think they have at least a small chance of living to be 90 or spending 25 years in retirement if they retire at age 65. Based on these results, it seems like many workers aren't planning and saving enough to cover the full amount of time they want to spend in retirement. This makes it more likely that they will outlive their retirement savings.
Income replacement: 14% of people who are working now said they thought they would need less than 50% of their income before retirement to live comfortably. Another 36% thought they would need between 50 and 70%. But 62% of people who are already retired say that their income is 70% or more of what it was before they retired.
Planning: Almost 6 in 10 workers (59%) said they hope to have the same or a better standard of living in retirement than they did when they were working. But when current workers were asked if they or their spouse had figured out how much money they would need to retire comfortably, 58% said no.
Jack VanDerhei, a professor at Temple University, EBRI fellow, and co-author of the Retirement Confidence Survey, said, "Recent research has found that when a "traditional" pension is frozen, many workers in the pension are unlikely to get the same benefit value contributed to their 401(k) plan." "Each case is different, but it's clear that people who are currently working should plan for their retirement based on the long-term trend away from "traditional" defined benefit pensions and toward 401(k)-type plans.
He also said, "We find that many people need to save more than they are if they want to have a comfortable retirement."
"Working 'in retirement' may be one part of the solution," said Michael Falcon, chief operating officer of the Retirement Group at Merrill Lynch, which sponsored both the EBRI study and its own New Retirement Survey. "Seventy-seven percent of our respondents said that if they could work full-time, part-time, or switch back and forth between work and leisure, they would do so," Falcon said. "Working after retirement can help with money, but Americans also say they want to work to stay socially and physically active."
