| Subject: Americans overconfident about retirement |
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Betty
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Date Posted: 11:03:55 05/15/05 Sun
Americans overconfident about retirement
by Humberto Cruz
Many fail to save, yet say they will live comfortably; half don't try to calculate how much they will need
``While most American workers save for retirement, they are doing it without a clear goal and without knowing how much money they will need. Yet they expect to have more than enough to live comfortably when they retire.... American workers lack financial savvy and are deluding themselves if they think everything will somehow turn out fine in the end.''
That's what I wrote, word for word, in 1995. That was the first year I covered the annual Retirement Confidence Survey by the Employee Benefit Research Institute, the longest-running and arguably most comprehensive study of Americans' attitudes toward retirement and preparedness for it.
This year, as the Institute released its 15th annual survey, I found the same disquieting theme of false confidence running through the results. Except the problem is more urgent now, as the oldest among a wave of 76 million baby boomers will hit the traditional retirement age of 65 in just six years.
And the situation ``is going to change only if workers make a priority of modifying their lifestyle to fit their income,'' get their debt and expenses under control and make savings an essential part of their budget, said Dallas Salisbury, president of the institute.
Consider the numbers. The proportion of workers who say they or their spouses have saved something for retirement, after peaking at 74 percent in 2000, stands at 69 percent. But their savings are modest. More than half of the 1,001 workers surveyed this year have less than $25,000 in total savings. Among those 55 and over, more than half have less than $50,000.
No wonder 55 percent of all workers feel they are behind schedule in their retirement savings, including 32 percent who say they are behind ``a lot.''
And yet -- this is the amazing part -- 66 percent of all workers say they are confident they will have enough money to live comfortably in retirement, including 25 percent who say they are ``very confident,'' up from 21 percent in 1995.
Even more amazing, many in this ``very confident'' group are not saving anything now, have meager savings and/or debt problems, and have never attempted to figure out how much they'll need to save to retire comfortably.
Just 42 percent of workers -- and only 48 percent of those 55 or older -- say they or their spouses have even tried to calculate how much money they'll need.
``I think there is a certain amount of denial and anxiety. A lot of people fear `doing the calculation' would be depressing,'' said Mathew Greenwald, president of Mathew Greenwald & Associates, a research firm in Washington, D.C., that has conducted all 15 retirement-confidence surveys.
Even among those who have tried, many use less than reliable methods, including guessing. (For a ballpark estimate of how much you need to save and useful savings tips, check out the institute's public service Web site, www.choosetosave.org, where you can also read more about the survey).
New questions this year aim to find out how to get American workers to save more. The answers suggest that increasing employer matches and making savings ``automatic'' through 401(k)s and similar retirement plans at work could boost savings.
So why don't more people save? The three reasons given most often in the survey were the burden of everyday expenses, child-rearing and medical costs.
I would add these two: having no clue as to how much money they will need in retirement (because they've never tried to figure it out) and believing, quite optimistically, they can work and earn money forever.
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