Have You Saved Enough for Retirement?

Please continue to help the blog grow.  Forward this to others who may be interested.  At the bottom of the article, you can find out how to sign up for the email service.




I read a really interesting document this weekend: The 2010 Retirement Confidence Survey, published by the Employee Benefit Research Institute.  I encourage you to read the entire document.  Here’s the link:

http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=4488




Today’s blog is a summary of some of the key points I read in this document.  Sometimes, when I summarize a document, I feel like I am able to include every important point from the source document in my summary.  This time, I feel different.  I’m giving you a lot of key points, but the source document is great.  It’s a survey of workers and retirees.  If you’re interested, take the time to pull it up.  It has great info and great charts.




Before I tell share the data that I consider to be so important, I want to give you a few things to think about when you read my summary:

1. Many people argue that we need to simply increase the age requirement for social security.  I would argue that it’s not that easy.  Many people are not healthy enough to work at age 65 (or have a sick family member that they must take care of).  In addition, many people do not have current skills and some employers prefer to get rid of older employees.  From a macro perspective, if more people are working, that means we need more jobs.  Good luck on that one.
2. Most people save very little for retirement.  As a result, they rely on Social Security – so it’s an important issue.
3. Most people will struggle simply paying for Medicare.

Now, on to their data…




Confidence is Low

Only 16% say they are very confident that they will have enough money to live comfortably throughout their retirement years.  22% say they are not at all confident.




Only 12% are very confident that they will have enough money to pay for medical expenses during retirement.  26% say that they are not at all confident.




Only 10% are very confident that they will have enough money to pay for long-term care expenses in retirement.  31% say that they are not at all confident.




Not Everyone is Saving

69% of workers say that they have saved money for retirement.




71% of retirees say that either they or their spouse have saved for retirement.




60% of workers say that they are currently saving for retirement.




29% of Americans age 25-and-older say that they have not saved any money for retirement.  Of these people, 79% of workers and 60% of retirees say that this is because they could not afford to save.




The Amount People Have Saved is Too Low

The total savings and investments reported by workers (not including value of primary residence or defined benefits plan):

Less than $1000 – 27%

$1000 – $9,999 – 16%

$10,000 – $24,999 – 11%

$25,000 – $49,999 – 12%

$50,000 – $99,999 – 11%

$100,000 – $249,999 – 11%

$250,000+   — 11%




In other words, 66% of people have less than $50K.   Granted, the survey group is 25 and older (so some young people still have loads of time), but there are not many people near the high end.




Approximately 73% of employed workers are offered a retirement plan.  Of those, 81% contribute to the plan.  People who participate in these plans are almost 3X as likely to have savings and investments of at least $50K (56% vs 19%).




Interestingly, retirees have similar numbers:

Less than $1000 – 27%

$1000 – $9,999 – 15%

$10,000 – $24,999 – 14%

$25,000 – $49,999 – 11%

$50,000 – $99,999 – 6%

$100,000 – $249,999 – 15%

$250,000+   — 12%




In 2007, the Fed’s Survey of Consumer Finances found that the median level of household assets was $221,500.  This includes primary residences.  Houses are worth less today.  Retirees are not going to be able to take equity out of their house.




Burying Your Head in the Sand

46% of workers (or their spouse) have tried to calculate how much money they need to save for a comfortable retirement.




For people who make $75K or more, the amount that they think they will need for retirement is:

<$250K – 13%

$250K – $499,999 – 16%

$500K – $999,999 – 30%

$1MM – $1.499MM – 13%

> $1.5MM – 20%

Don’t Know / Don’t Remember – 8%




People who have done a calculation estimate that they need more than people who have not done the calculation.  Of course, it’s possible that people who are not saving much do not want to do the calculation.




For people who have done the calculation, their confidence in their ability to reach their number is:

Very Confident – 25%

Somewhat Confident – 40%

Not Too Confident – 19%

Not at All Confident – 15%

For people who have done the calculation, they report making the following changes:

Started saving or investing more – 59%

Changing their investment mix – 20%

Reducing debt or spending – 7%

Enrolling in a retirement savings plan at work – 5%

Deciding to work longer – 3%

Researching other ways to save for retirement – 3%




People Get Advice All Over the Place

Where do workers (not retirees) get investment advice?

33% — professional financial advisor

27% — family, friends or co-workers

10% — newspapers or magazines

10% — internet

9% — their employer or former employer

8% — bank or credit union

7% — company managing their employer-sponsored retirement plan




Lowering Expectations

In 2009 and 2010, 25% and 24% of workers reported that they postponed their expected retirement age during the past 12 months.  The reasons (for the 2010 survey) are:

29% — the poor economy

22% — a change in employment situation

16% — inadequate finances or can’t afford to retire

12% — need to make up for stock market losses

7% — lack of faith in social security or government

7% — cost of living in retirement will be higher than expected

6% — needing to pay current expenses first

6% — wanting to make sure that they have enough money to retire comfortably




Note: 2% of all workers report that they will retire sooner than they had planned.  (My suspicion is that these people want to tap into social security while it’s still there.  Seriously, most of these people attribute early retirement to poor health or disability.)




People Actually Retire Earlier Than Expected

Back in 1991, 11% of workers thought that they would work past 65.  In 2010, this is 33%!  But, the median has stayed constant at 65.




What actually happens is a little different.  More people retire earlier than expected.

41% of retirees leave the work force earlier than expected.  Of those, 95% cite negative reasons and of that group, the negative reasons are:

54% cite health problems or disability

26% downsizing or closure

19% having to care for spouse or other family member

16% say change in skills required for job

11% — other work-related reasons




People Kid Themselves That They Will Work During Retirement

70% of workers plan to work for pay during retirement.  But only 23% of retirees actually work for pay in retirement.  Of those who work, many attributed it to non-financial reasons (such as staying active or enjoying work), but 90% had at least one financial answer as part of their reason for working during retirement.




People Don’t Save Enough for Healthcare

A study by the Employee Benefit Research Institute found that a 65 year old man who retired in 2009 will need between $68K and $173K to cover health insurance premiums and out-of-pocket expenses in retirement if they want a 50% chance of having enough money.  If they have $134K – $378K, they will have a 90% chance.  Women will need more (because they have greater longevity).




Have You Saved Enough to Maintain Your Spending?

In 2010, retirees said that their spending during retirement (compared to pre-retirement spending) was:

7% — much higher

6% –  a little higher

37% — about the same

26% — a little lower

23% — much lower




Counting on Social Security?

32% of workers say that Social Security will be a major source of income.  But, if you talk to actual retirees, 68% say that it’s a major source.




56% of workers expect to receive benefits from a defined benefit plan.  Yet, only 37% report that they or their spouse currently have such a benefit with a current or previous employer.




The amount of employees who feel confident that social security will continue to provide benefits of at least equal value to benefits received by retirees today:

7% — very confident

23% — somewhat confident

33% — not too confident

37% — not at all confident
__________________________________________________
If you want to be on my email list:

1.      go to www.leedsonfinance.com

2.      toward the top right corner is a place to click on for email service—click and enter your email address
3. you will receive an email which will require you to click on a link to confirm that you want to be on the list

IMPORTANT: if you don’t receive the email in step 3 or you don’t click on the link, you won’t be on the list.  Sometimes, people who use corporate emails get blocked (it’s probably 50% of the time).  So if you don’t get the email, you know you need to use a personal email.