Posted on 04/04/2006 8:13:53 AM PDT by libertarianPA
NEW YORK - The majority of American workers think they'll be able to retire comfortably, but most aren't saving nearly enough to meet that goal, according to a new study.
The Employee Benefit Research Institute's annual retirement confidence survey, released Tuesday, found that about 68 percent of workers are confident about having adequate funds for a comfortable retirement, up slightly from 65 percent in 2005.
At the same time, more than half of all workers say they've saved less than $25,000 toward retirement, according to the Washington, D.C., based research group. Even among workers 55 and older, more than four in 10 have retirement savings under $25,000.
"`Overconfidence' is the word that comes to mind," said Jack VanDerhei, co-author of the study.
He said that the poor savings performance was especially troubling because it comes as many of the nation's employers are eliminating the defined benefit plans — better known as pensions — that have buoyed the retirements of current workers' parents and grandparents. Many companies also are eliminating retiree health care coverage or asking retirees to contribute more for it.
"It's clear that people currently working should factor into their retirement planning the long-term trend away from traditional defined benefit pensions," VanDerhei said. "That means people need to be saving more than they are."
Not all was doom and gloom in the report, the 16th in a series begun in 1991.
More than 70 percent of workers say that they or their spouses have saved something toward retirement — a percentage that's held fairly level for the past six years, EBRI said.
And while many have meager savings, others are doing quite well at accumulating retirement nest eggs, the study found.
While more than half of workers have less than $25,000 set aside, 12 percent have $25,000 to $49,999; 12 percent have $50,000 to $99,999; 11 percent have $100,000 to $249,999; and 12 percent have $250,000 or more.
As would be expected, older workers generally have more set aside than younger workers, with 12 percent of those 55 and older reporting account balances of $100,000 to $249,999, and 26 percent with accounts of $250,000 and up.
VanDerhei believes that people would save more if they took the time to project what their costs in retirement are likely to be. But just 42 percent of workers say they've done such a calculation.
He suggests that people who are comfortable with managing their own accounts can do well with online calculators, including the Ballpark Estimate calculator that can be found on EBRI's sister site at http://www.choosetosave.org/ballpark.
"But some people are absolutely clueless about this and frozen into inactivity as a result," he said. "They really should find a fee-based professional to help them out. It's going to cost a couple of hundred dollars, but you'll make that amount up many times in the future."
The study also found that workers are eager for help in saving more.
Nearly 70 percent of workers said they were either strongly favorable or somewhat favorable to 401(k) and other retirement plans setting up automatic enrollment for new workers, and almost the same percentage favored automatic increases in employee contributions.
Dan Houston, senior vice president for retirement and investor services with Principal Financial Group Inc. in Des Moines, Iowa, said that if workers are told they aren't saving enough, most are willing to increase their 401(k) contributions — including automatic increases each year.
He added that workers should aim to save enough to replace 85 percent of their preretirement income when they stop working, not the 70 percent that many workers believe is adequate.
That may sound daunting, but Houston said a 25-year-old man or woman entering the work force today who immediately starts saving 15 percent of income will be able to retire at 60 with enough savings to do that.
"If you adjust your standard of living right after school, and learn to set aside 15 percent — either by salary deferral or company match — it's doable," he said.
A number of large companies have begun introducing automatic enrollment into their plans to try to get higher participation by younger and lower-income workers, but adoption hasn't become widespread.
The survey was conducted by Mathew Greenwald & Associates, a survey research firm based in Washington, D.C. It involved phone interviews with more than 1,250 individuals, with a margin of error of plus or minus 3 percentage points. Principal Financial was among the underwriters of the study.
Most investment counselors tell you not to put kids through college at the expense of your own retirement funding. Suze Orman likens it to the oxygen masks in airplanes - you make sure yours is in place before you help anyone else.
Unlike us folks out here in the private sector. My check is dinged for $200 every check ... my money, not the taxpayers ... and then, my employer matches it.
After that it goes into the SS lockbox and is consumed by maggots.
Nonsense. If you'd done the arithmetic and written "there are 72,000,000 fed or state workers in the US", you would have realized the silliness of this assertion.
Well part of it comes from student tuition.
In 2002, state and federal workers' compensation laws covered about 125.6 million employees. Covered payroll in 2002--that is, total wages paid to covered workers--was $4.62 trillion.
http://www.findarticles.com/p/articles/mi_m6524/is_2004_Annual/ai_n15861008
Below is the link to this organization and this story can be accessed via this link:
http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=3630
"• Modest savings: More than half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $50,000 (52 percent). 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)."
The way this reads to me is this so called non profit doesn't include the value of the home and any deferred plan like an IRA or 401k.
So if a couple's combined deferred savings from a 401k is 500,000 and the value of their home is $500,000 and they only have $2,500 in a savings account. They only have $2500 saved for retirement
Sounds like more liberal BS from the lying spinning AP.
"which presumably then provides an income you will not outlive.""
While your addendum is accurate, you must have missed this part above.
Annuities are the probably the preferred way to "spend it all". The only problem with annuities is that they are only as good as the companies issuing them.
The method of annuity usage I learned was to use 60% of the lump to buy a 20 year annuity, then use the remaining 30% compounded for 20 years to buy a second if needed. Finally, the remaining 10% compounded for 40 years to buy a third if needed.
Only if they work for the DMV. ;>)
"Saving and investing or even charity would do the exact same thing. Why does the government need to be involved?"
Because it did not work which is why the government got involved in the first place.
You lost me again. Are you saying 25% of 125.6 million workers are Federal or State employees? Still don't see a source for you assertion.
Look at post #45. Silly me.
I did the calculator mentioned in the article, and it seems at age 40 we already have enough saved to replace $123% of our income. That doesn't smell right!
I assumed an 8% return on investment now and later. I also assumed 3% inflation rate and 2% income growth. Am I way off here?
Hard choices have to be made and we preferred to go with the most appropriate school not the cheapest one. I don't prefer to do things that way, I'm a saver and intend to be saving hard afterward but right now its counterproductive.
That is because you live in Texas, where the leaders are a little smarter. Up here in Wisconsin, some government workers get a lump sum payment upon retirement, and a monthly check afterwords.
Almost. They didn't include defined benefit, like a company pension. They probably did include IRA and 401K plans.
You got that right. My husband and I have saved faithfully the entire time we have been together. We are in great shape if what they say in this article is true.
I don't know about the state, but the feds are not outrageous.
You have someone who has put in 30 years of service. At the highest point in their salary (high three) they make 50,000 per year. That is what my husband makes now as a GS-9 Battalion Chief. The retirement calculation is 1% of the high three salary times years of service, which adds up to $15,000 per year or $1250 per month in direct pension funds. The rest of the retirement is funded through Social Security (yeah right) and through the thrift savings plan where the employee can invest up to 15% of pretax income. By the time taxes, retirement, health insurance, etc are taken out of his monthly paycheck, we have about $2600 per month left of his base salary. We invest our 15% religiously and are working on getting our mortgage paid off in the next ten years, because I don't see SS lasting through our lifetimes. We also have three kids to put through college.
The French Riveria is not in our future, but that's ok because my husband loves his job.
They don't pay into SS.....Oh, yes, they do. Plus their Retirement accounts.
What we all pay into SS comes pretty close to what they say is necessary.
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