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What You Should Take Away From This Year's Retirement Confidence Survey

Gary Foreman

The Employee Benefit Research Institute recently released its 2012 Retirement Confidence Survey. The survey contains a number of interesting findings, especially for for baby boomers and those thinking about retirement.

For instance, current workers' confidence in their ability to pay for basic expenses in retirement has dropped dramatically since 2007. At that time, 40 percent were very confident. Today, that meter has dropped to 26 percent.

Also consider workers' confidence that they're doing a good job of preparing for retirement. In 2006, only 12 percent said "not at all." By 2012, that number has increased to 19 percent.

Workers also are expecting to work longer. Twenty years ago, 50 percent planned to retire before age 65. Today, less than one in four expect to retire at that age.

The other half of those who are retiring report it's happening sooner than they had planned. Fifty percent say it's due to health issues and another 21 percent site the loss of their jobs.

There's also a big difference between workers and current retirees in their dependence on Social Security. Approximately 69 percent of existing retirees say Social Security is a major source of their income. Meanwhile, only 31 percent of today's workers expect Social Security to play the same role for them.

Additionally, the recession appears to be affecting the number of workers who have money saved for retirement. In 2009, 75 percent said they had savings. Today that number has fallen to 66 percent. The drop was especially steep with household income under $35,000 at only 35 percent. The assumption would be that they consumed money saved for retirement for current expenses.

Age makes a difference in retirement savings, too. Workers between the ages of 35 and 54 are just as likely to be saving money as their counterparts 10 years ago. But among younger workers ages 25 to 34, the number saving for retirement has dropped from 70 percent to 55 percent. Although it wasn't cited in the survey, rising student loans may contribute to the decrease.

The amount saved could fall far short of what that age group needs in retirement. Fully 60 percent report that they and their spouses have saved less than $25,000 for retirement (excluding their home and defined benefit pension plans). About half of them haven't managed to save more than $1,000.

Finally, less than half of the workers surveyed have calculated how much money they'll need at retirement. As a result, the survey shows they are more likely to have a higher target for savings.

What can you do with this info?

If you're among the 50+ percent of people who haven't calculated what you'll need for retirement, do it. The National Association of Personal Financial Advisors (www.napf.org) can point you to a fee-only planner who can help with. Or you can use one of the many online calculators, such as AARP's.

Next, create a savings plan that will get you to your retirement savings goal. Again, you'll want to use a financial planner or online calculator to know how much you'll need to save each year.

Then make retirement savings part of your regular budget, rather than an afterthought. Cut other expenses or seek another source of income if necessary.

You also shouldn't plan on relying too heavily on Social Security benefits. According to the Social Security trustees, there are currently about three people working for each person collecting benefits, and that ratio is gradually going down. So unless you're already up in years or plan on living in poverty, it's important to have and execute a retirement savings plan that's not totally dependent on Social Security.

Gary Foreman is a former financial planner who founded TheDollarStretcher.com. The site features thousands of articles, including this one on whether boomers will have enough money to retire.

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