5 Ways Retirement Expectations Are Changing

Most Americans are uncertain about their ability to retire

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Few Americans have great expectations for their retirement. Just 16 percent of current workers say they are very confident about having enough money for a comfortable retirement, according to an Employee Benefit Research Institute and Mathew Greenwald and Associates survey released today. “Americans’ attitudes toward retirement have clearly tracked the economy the last couple of years, and that seems to be the case in 2010,” said Jack VanDerhei, EBRI research director and co-author of the survey. Even fewer workers feel confident about being able to pay for medical expenses throughout retirement (12 percent) or long-term care costs (10 percent). Here is a look at how Americans have changed their retirement plans since the recession began.

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Failed preparations. Workers have a good reason to be worried about their retirement finances. Just 60 percent of current workers say they or a spouse are currently saving for retirement, down from 75 percent in 2009, and only 69 percent have ever saved for retirement. “A distressing number of people have no savings at all,” says VanDerhei. Among those who are preparing for retirement, just over a quarter (27 percent) have less than $1,000 saved. And over half (54 percent) of current employees report that their savings and investments, excluding the value of their home and traditional pension plan, total less than $25,000.

A delayed exit. Instead of funding 401(k)’s, many Americans plan to simply work past age 65. A quarter of workers have postponed their planned retirement age over the past year due to the economy, a change in their employment situation, inadequate finances, and the need to make up for stock market losses. The percentage of workers who expect to retire after age 65 has gradually increased from 11 percent in 1991 to 33 percent in 2010, according to this 20-year-old annual telephone survey. But workers don’t always get to choose when they retire. “At least a third of current retirees were forced to retire earlier than they wanted to,” cautions VanDerhei.

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Changing income steams. Most Americans (75 percent) are expecting to rely on a 401(k) or other employer-sponsored savings plan in retirement and continued income from employment (77 percent), up from 69 and 70 percent respectively in 2005. The proportion of Americans who expect to receive traditional pension income has dropped from 62 percent in 2005 to 56 percent today.

Higher savings goals. Less than half of workers (46 percent) have attempted to calculate how much money they will need for a comfortable retirement. Among those who have determined their savings needs, the amount has significantly increased over the past decade. While just under a third (31 percent) of workers thought they needed at least $500,000 to retire in 2000, now over half (54 percent) of employees think they will need half a million or more to permanently exit the workforce. “Put away 11 to 15 percent of your income for retirement,” advises Daniel Houston, president of retirement, insurance, and financial services at Principal Financial Group, an underwriter of the survey.

[See 6 Ways Employers Will Change 401(k)s in 2010.]

Rebounding investments. As the stock market has begun to creep up again, so has worker's confidence in their ability to invest their savings successfully. Some 32 percent of employees are now very confident in their investment savvy, up from 24 percent in 2009, but down from a high of 45 percent measured in 1998. “People who stayed in the market have seen a nice rebound,” says VanDerhei. Yet, some investors remain wary that the stock market’s volatility. About half (54 percent) of retirement savers say that stocks are a sound long-term investment, down from 61 percent in 2002.