The Exchange

Your Retirement: It’s Not Happening

The Exchange

Not sure if you heard, but Americans aren't prepared for retirement.

They don't know how much money they'll need; their confidence in their ability to afford a comfortable retirement is at historically low levels; they don't contribute to a retirement plan, or they don't contribute enough; they mistakenly believe they'll be able to afford retirement on Social Security alone. You get the idea.

Just about every week another survey comes out saying as much. One of the latest says nearly half of Americans aren't contributing to a retirement plan. Keep in mind that many of these surveys are released by money managers who want a cut of your retirement savings. Nevertheless, here are just a few recent (and mostly scary) examples:

T. Rowe Price (April 16)
-Most investors (69%) between the ages of 21—50 plan to work either part-time or full-time during their retirement years.
-Among those who plan to work at least part-time, most (75%) will do so because they want to stay active and involved; only 23% believe they will do so because they will not have saved enough money.

LIMRA (April 24)
- 49% of Americans said they weren't contributing to any retirement plan; Americans ages 18-34 were more likely (56%) to be among those not saving.
-The survey found that only a quarter of all Americans and less than a third of Americans over age 50 worked with a financial professional to plan for retirement.

Fidelity Investments (May 1)
-Average balances of 401(k) retirement plans were about 62% higher as of March 31 than the first quarter of 2009, when the stock market reached a 12-year low.
-Strong stock market performance accounted for about 80% of the average $5,500 increase in the first quarter of 2012, compared with the prior quarter, while the remaining 20% was from employer and worker contributions, the firm said.

BlackRock (May 3)
-There's a marked gap between today's and tomorrow's retirees. How current retirees are actually living outstrips what today's workers are expecting.
-64% of current retirees strongly agree that their financial situation allows having a choice not to work anymore, while just 37% of workers expect their finances will allow the choice not to work, according to the survey. -One-quarter of today's workers — compared with 51% of retirees — are confident about having enough money to live comfortably in retirement.

Charles Schwab (May 7)
-Employers and their employees hold different perspectives on how to best achieve retirement readiness through 401(k) plans; most workers are unengaged and financially unprepared for retirement.
-More than half (54%) of employers report that employees participating in plans are not taking full advantage of the investment options, features and services offered in their 401(k) plan.
-A separate survey of 401(k) participants found that more than half (52%) say they don't have the time, interest or knowledge to properly manage their 401(k) portfolio.

Fidelity Investments (May 9)
-Health expenses for a retired couple climbed 4% from last year to $240,000.
-The estimate assumes that a couple retires when both spouses are 65 years old and that they qualify for Medicare but have no retiree-health coverage through an employer. It uses life expectancies of 17 years for men and 20 years for women.
-Nearly three-quarters (73%) spend less than eight hours per year managing their 401(k) plan account.
Some other (somewhat contradictory?) findings:
-A majority (61%) have calculated the savings they believe they will need for retirement. Among this group, 84% were confident that their savings would last.
-Respondents reported on average that they feel they need to bridge an eight-fold gap between how much they have saved and how much they calculated they would need in retirement.

By the way, these same headlines have been splashed across financial news sites (this one as well, most likely) year in, year out — perhaps with different numbers, but a similar conclusion: that Americans are financially ill-prepared for retirement.

We all know the reasons: the financial crisis of 2008 took a big bite out of many a retirement portfolio; people are living longer and need pricier medical care. And then there are the people who don't earn enough to sock a bit of that away for their golden years.

Are these surveys screaming at the wrong people? Meaning, are the people who read about these surveys already  well-informed about saving and investing for retirement, and likely well on their way. Or is a fundamental behavioral or policy change needed to address the issue? Perhaps workers are just not saving and investing the right way. Maybe, as some experts have noted, the 401(k) isn't the most effective retirement-saving vehicle.

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