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10 Reasons to Worry About Your Retirement

Emily Brandon

Americans are feeling increasingly pessimistic--or some might say realistic--about their ability to retire well. Nearly half (49 percent) of workers say they doubt their ability to afford a comfortable retirement, according to a new Employee Benefit Research Institute survey of 1,003 workers age 25 and older and 251 retirees. And 28 percent of employees say they feel "not at all confident" about their retirement prospects, the highest level ever recorded by the 23-year-old annual survey. Here's why workers feel uneasy about their retirement years:

Not saving enough. While 66 percent of Americans say they or their spouse have saved for retirement, most people have accumulated only very small balances. More than half (57 percent) of the survey respondents report less than $25,000 in savings and investments (excluding the value of their primary home and defined-benefit plans), and 28 percent say they have less than $1,000 saved. "We recommend that individuals save 11 to 15 percent of income over an entire working career, and that includes an employer matching contribution if there is one available. If you start later, that is going to be a little bit higher," says Greg Burrows, senior vice president of Principal Financial Group, an underwriter of the survey. "Ten times your income would be another target to have saved. If an individual needs $50,000 of retirement income, on average, they should have about $500,000 saved in order to have sufficient income combined with Social Security to last over a lifetime."

[Read: The 10 Worst Places to Retire.]

Spending savings early. When they change jobs, workers need to decide what to do with an old 401(k) plan. Just over a quarter of workers (26 percent) say they cashed out their 401(k) and either spent the money or used it to pay down debt, and likely also paid the resulting income tax and early withdrawal penalty (if under age 55) on that distribution. Workers can delay taxes and avoid the early withdrawal penalty by leaving the money in the old 401(k) plan, moving it to a new 401(k), or rolling over their balance to an IRA.

Rising cost of living. Saving for retirement is often put on hold as workers struggle to pay for current expenses. Many employees say that job uncertainty (30 percent) or making ends meet (12 percent) is their most pressing financial issue, rather than planning for retirement (2 percent). And 41 percent of workers say the day-to-day cost of living is a major reason they do not contribute (or contribute more) to their employer's retirement plan. "Putting off saving for retirement will make the problem of financing retirement even worse," cautions Jack VanDerhei, EBRI's research director.

Too much debt. It's extremely difficult to save for the future when you are still striving to pay off past costs. Over half (55 percent) of workers report having a problematic level of debt, EBRI found. And a quarter of employees indicate their current level of debt is higher than it was five years ago.

No emergency fund. Only half of workers say they could definitely come up with $2,000 if an unexpected need arose within the next month. And 31 percent of employees report they had to dip into their savings to pay for basic expenses during the past 12 months. An emergency fund is an important tool that allows you to avoid dipping into your retirement stash, and paying the resulting taxes and fees, for a sudden expense.

[Read: The Best Tax Breaks for Retirement Savers.]

Don't know how much to save. Most workers set lofty retirement savings goals for themselves. To achieve a financially secure retirement, many workers say they would need to save between 20 and 29 percent of their income (20 percent) or even 30 percent or more (23 percent). However, when asked for the dollar value they would need to retire well, most people said they could get by with between $250,000 and $499,999 (21 percent) or even less than $250,000 (29 percent). Only 18 percent of Americans are aiming for a nest egg of $1 million or more. And most workers simply guessed at these saving and account balance targets. Less than half of workers (46 percent) say they have tried to do a systematic retirement needs calculation. "Many people become frightened when they see the gap, but doing the calculation seems to increase savings rates," says Mathew Greenwald, president of Greenwald and Associates. "People make better decisions and have more control when they know."

Unpredictable health care costs. While only 16 percent of workers say they feel "not at all confident" about being able to pay for basic expenses in retirement, significantly greater numbers of individuals doubt their ability to afford retirement medical expenses (29 percent) and especially long-term care costs (39 percent). There are good reasons to be worried. Several recent studies have calculated that a 65-year-old couple retiring in 2012 would need from $227,000 (EBRI) to $240,000 (Fidelity Investments) to pay for out-of pocket medical costs throughout retirement. And neither of these estimates includes long-term care expenses. "Some workers may be waking up to the realization of just how much money is needed to secure a comfortable retirement," says VanDerhei. "The decrease in confidence is a better degree of realism, especially among those who are least prepared."

Not paying attentions to costs. Employers that sponsor a 401(k) plan are now required to provide information about the fees and expenses deducted from participant accounts. However, only half (53 percent) of 401(k) plan participants report having noticed this information, and just 7 percent say they have made changes to their investments as a result of the new fee information. Minimizing fees will help your account balance to grow faster, sometimes resulting in thousands of extra dollars upon retirement.

False expectations. Many people assume they will be able to get by on less money in retirement once they give up commuting and work clothes. Some 58 percent of workers expect to spend less money in retirement than they do now, and just under half (48 percent) of retirees report they were able to decrease spending. But not everyone is able to cut costs, and you may encounter new expenses in retirement. Some 30 percent of retirees say their spending in retirement is unchanged from their working years, and 21 percent of retirees experienced an increase in spending.

[Read: Why Dow 14,000 Was One of the Market's Toughest Milestones.]

Unexpected retirement. Delaying retirement gives you more time to save and reduces the number of years your savings needs to last. The proportion of workers who expect to retire after age 65 has increased from 11 percent in 1991 to 36 percent in the 2013. But few retirees actually manage to delay retirement. "Individuals ought to plan for the fact that they won't be able to work in retirement," says Burrows. "If you're in a position to be able to work and have the opportunity, that's fantastic, but it's not something that's based on reality that everyone can depend on." Only 14 percent of current retirees retired after age 65, largely because almost half (47 percent) of retirees say they retired unexpectedly, often due to health problems or disabilities, a downsizing or business closure, or having to care for a spouse or other family member.

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