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Most Americans are unprepared for retirement
Old 04-11-2008, 04:25 PM   #1
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Most Americans are unprepared for retirement

Survey: Americans more worried about retirement savings - Apr. 9, 2008

NEW YORK (CNNMoney.com) -- Americans are becoming increasingly worried about saving for their retirement as the nation's economic outlook continues to darken, according to a new survey of workers and retirees released Wednesday.
Only 18% of workers polled werevery confident about saving enough money for a comfortable retirement, according to the Employee Benefit Research Institute's 2008 Retirement Confidence Survey. That's the steepest annual decline in the survey's 18-year history, and down sharply from 27% in the previous year.
While confidence levels among all respondents declined, the survey found younger (ages 25-34) and lower income (under $35,000 annually) workers were the most dispirited about their ability to save for a comfortable retirement.
There are many factors that contribute to savings planning but "the economy and health costs are major concerns," said Dallas Salisbury, president of the EBRI, in a statement.
Health care woes. More than half of workers who retired earlier than planned, did so because of health problems or disability, according to the survey.
At the same time, nearly half of the retirees polled said their health care costs were higher than they expected and more than half say they are more worried about their financial future now than they were right after entering retirement.
Retirees aren't the only ones worried about health care costs. The survey showed that only 34% of workers expect to collect employer-paid health insurance after they stop working, down from 42% last year, as more employers eliminate health care for future retirees.
A rising awareness about the diminishing availability of employer-paid health care coverage in retirement may actually turn out to be a blessing in disguise, according to Salisbury.
"If there is a silver lining, it's that Americans finally may be waking up to the realities of being able to afford retirement," he said. And that reality may lead to more prudent savings plans.
Modest savings. Overall, the amount of money that workers are socking away for retirement is modest at best, according to the EBRI.
Nearly half of all workers have less than $25,000 set aside. And a full 22% of workers and 28% of retirees say they have no savings of any kind.
As a general rule, retirement savings - including social security benefits and pension - should be large enough to provide about 80% of pre-retirement income.
Unrealistic expectations. Workers may also be basing their retirement plans on "unrealistically low" estimates about how much they will spend after leaving the work force, according to the EBRI.
The survey found that 58% of workers think they will spend less money in retirement than they do while working.
However, only 46% of retirees said that was the case and 54% said they were more concerned about money now than they were at the beginning of their retirement.
Do the math. Completing a retirement savings calculation is one of the best ways to encourage good saving habits.
After calculating a goal amount for retirement, 44% of respondents said they modified their savings plans, with 59% increasing the amount they put away.
Other respondents changed their investment mix, reduced debt or spending, or enrolled in a retirement savings plan at work.
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I took a similar approach to that same report
Old 04-12-2008, 02:40 PM   #2
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I took a similar approach to that same report

I basically was warning people in a recent post to beware the disgruntled co-worker who, may have thought they were where they needed to be only to find out, that they were not even close.

The actual EBRI report suggested that if you made considerably less, you were probably not so worried about retirement - surmising that, they probably aren't even thinking about it because they will never even know it!

<Retiring with a Plan from Financial Author Paul Petillo>
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Old 04-12-2008, 02:58 PM   #3
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There's a retirement calculator in article that seems downright wrong. I put in 100K pay, 40-49 age group - it says I one only needs $580 K to retire on 80% of preretirement income ?

Can you retire early? - Results - CNNMoney
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Old 04-12-2008, 03:13 PM   #4
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Originally Posted by Delawaredave5 View Post
There's a retirement calculator in article that seems downright wrong. I put in 100K pay, 40-49 age group - it says I one only needs $580 K to retire on 80% of preretirement income ?

Can you retire early? - Results - CNNMoney
At the bottom it says,

"Notes: Assumes 35-year retirement beginning at age 60 with 80% of preretirement income; Social Security starts at 62; 4% annual real rate of return; initial withdrawal of 4%, adjusted annually for inflation; pension equals 25% of preretirement income; part-time work for 10 years at 25% of preretirement pay.'

Could that explain it?
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Old 04-12-2008, 03:48 PM   #5
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Originally Posted by Want2retire View Post
At the bottom it says,

"Notes: Assumes 35-year retirement beginning at age 60 with 80% of preretirement income; Social Security starts at 62; 4% annual real rate of return; initial withdrawal of 4%, adjusted annually for inflation; pension equals 25% of preretirement income; part-time work for 10 years at 25% of preretirement pay.'

Could that explain it?
I don't understand how above can explain. The SS benefit should be around $23K - that means $57K /year needed return from the savings to get to 80% preretirement.

So looks like a 10% SWR - not so "safe" to me....
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Old 04-12-2008, 03:52 PM   #6
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They have SS, a pension, and a part time job...
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Old 04-12-2008, 04:04 PM   #7
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They have SS, a pension, and a part time job...
Actually the calculator says you only need $360 K if you have a pension to cover 25% of preretirement income

So $100K preretirement, $80 post retirement, $23K SS, $25K pension -- leaves $32K needs to come from portfolio -- like a 9% SWR.

Again, seems wrong. Or I'm grossly missing something here...
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The numbers measure whether you are on track to retire at 60
Old 04-12-2008, 05:20 PM   #8
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The numbers measure whether you are on track to retire at 60

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Originally Posted by Delawaredave5 View Post
I don't understand how above can explain. The SS benefit should be around $23K - that means $57K /year needed return from the savings to get to 80% preretirement.

So looks like a 10% SWR - not so "safe" to me....
All the calculator says is if you have a certain amount in savings now at age 40-49 you are on track to retire at 60. Tell it that you are currently 60+ and see how the number changes. That is under the assumptions given like 4% real return. I think that if you assume 7% (3% inflation) return you will find that your $580K that you have now will be over a million ten years from now. So if you are 49 and have the $580K and if you believe that you can get 4% return over inflation, you can keep working until you are 60 and retire "early".
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Old 04-12-2008, 05:26 PM   #9
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Hey folks - does the 45-49 age mean that they 'grow' the amount to age 60 by some compounding percent and then take 'that number' - which doesn't show??

That's the way it hit me when I glanced at it.

?

heh heh heh
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Old 04-12-2008, 05:37 PM   #10
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Originally Posted by unclemick View Post
Hey folks - does the 35-39 age mean that they 'grow' the amount to age 60 by some compounding percent and then take 'that number' - which doesn't show??

That's the way it hit me when I glanced at it.

?

heh heh heh
It must be how much you should have NOW and they must be assuming:
- Compounding of what you have now, plus
- Additional contributions

I guess at age 45 with 4% real annual growth - that $580K will probably approach $1MM by age 60 plus $300K of additional contributions ($20K/year x 15 years).

So that gets you to $1.3MM -- which would generate $52 at 4% SWR and adding SS gets you to 80.

Thanks for everyone's clarification - I should have realized up front.
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Old 04-12-2008, 05:51 PM   #11
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Originally Posted by unclemick View Post
Hey folks - does the 45-49 age mean that they 'grow' the amount to age 60 by some compounding percent and then take 'that number' - which doesn't show??

That's the way it hit me when I glanced at it.

?

heh heh heh
I thought so at first but it seems to assume something not stated like increase in salary with age and continuing contributions. The 35-39 year old can't grow to the 55-59 year old at 4% over inflation on current savings. For a current income of $100K/year the calculator gives $160K for 35-39 year olds and about $1200K for 55-59 year olds. The younger age won't starting point won't even produce the same as needed for the current retiring 60 year old and they won't use it for 20 years so there is a savings rate and maybe a salary increase that they aren't showing. $100K might be minimum wage 20 years from now.
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