Saturday, March 13, 2010

Are you comfortably prepared for retirement?

There is a timely article on MarketWatch by Howard Gold entitled "Retirement, what's that? - Commentary: Americans are woefully unprepared for their golden years" (similar data in CNNMoney.com article entitled "43% have less than $10k for retirement".) It's not really new news and not anything that I haven't been painfully aware of for quite some time, but it is an excuse to comment on the topic myself, piggybacking on his commentary. Gold tells us that according to the most recent Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) a mere 16% of workers are very confident they would have enough money for a comfortable retirement and only 19% of retirees said the same thing. In short, more than 80%, four out of five, are not looking forward to secure comfort in their "golden years." I am in that 80% and have been for quite some time. The way I put it recently, the best I have to look forward to is near-poverty, with Social Security and only a very modest level of additional investment income from my very meager retirement plans. The really scary thing is that as weak and fragile as my own personal financial situation is (and even presuming that I will have to work until I am 70 before retiring and work part-time, if I can, in retirement), I am actually much better off than the average American. That is truly scary. Gold tells us that EBRI says that over a majority (54%) of Americans (well, the surveyed workers) have less than $25,000 in total savings and investments (besides their house.) As lousy as my own situation is (by my own admission), I am actually in the top third of the EBRI savings range (above $50,000).

One caveat: These numbers include younger workers who are just starting out, so they may dramatically skew the results. I would have preferred to see a survey of workers within 20 years of retirement. Sure, it is true that saving for retirement needs to start at an early age, but I really think there should be two separate reports with rather distinct focuses: 1) A report for younger workers focused on how to get on and stay on a track for comfortable retirement, and 2) A report for middle-aged and older workers who are hopelessly off-track and have no realistic chance of ever getting back on track no matter how long they work or how much they save. Confusing these two distinct classes of workers does a disservice to both.

One highlight of the survey is that despite the fact that a lot of people acknowledge that they will need to "work a little bit longer" before retiring, a hefty percentage of current retirees (like 40%) were effectively forced to retire early due to illness or job loss and extreme difficulty finding work.

My own "solution" is to continue saving as much as I can, but at best thinking of such savings as a very modest "supplement" to Social Security, and to simply accept that I will be living at a near-poverty level in retirement. Sure, there is always the one in a thousand chance that I might have some financial windfall (such as winning the lottery or some technology business success) and suddenly have the extra million dollars needed to assure "comfort" in retirement, but you simply cannot plan on a one in a thousand fantasy outcome.

The main focus for me is simply the ongoing struggle to maintain a semi-decent income. You can't save for retirement without current income, but maintaining steady income is a very difficult proposition for many of us.

I will continue plodding along, making maximum allowable contributions to my ROTH IRA and SEP IRA retirement plans and saving some extra along the way as well. Ultimately, that is about the most that I can even hope to do.

-- Jack Krupansky

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