I recently posted about how Generation X is woefully unprepared for retirement. Far too many people are just crossing their fingers and hoping for the best, and a recent study shows that many people have serious misconceptions when it comes to retirement planning.
The 2012 Retirement Confidence Survey, recently released by the Employee Benefit Research Institute (EBRI), indicates that many Americans are simply clueless when it comes to retirement planning. Here are a few interesting statistics I pulled from the report.
In 2012, 37 percent of workers report they expect to wait until after age 65 to retire. At the same time, the percentage of workers expecting to retire before age 65 has decreased from 50 percent in 1991 to 24 percent (in 2012).
The most common reasons for postponing retirement were the poor economy, lack of faith in Social Security, and change in employment situation.
It appears that fewer and fewer people expect to accumulate enough wealth to retire early and are counting on working after they reach age 65 to make up for the shortfall.
But how realistic is that? My uncle was recently laid off at age 56 because the pharmaceutical manufacturer that employed him decided to move the plant across the country. He’ll likely end up taking a pay cut which was certainly not a part of his retirement strategy.
Disability or health problems could also force you to retire earlier than expected.
A minority (42 percent) of workers report they have taken the time and effort to complete a retirement needs calculation—the basic planning step that can help individuals determine how much money they are likely to need in retirement and how much they will need to save to meet that goal.
I’m a big believer in setting savings goals so you can track your progress as you go. But in order to set a realistic goals for your retirement you need to take the time to run some numbers There are several online calculators that will help you determine how much you’ll need to save up for retirement.
Regarding employer-sponsored savings plans such as the 401(k)…
Seventy-four percent of employed workers report their employer offers them a plan. Of those, 81 percent say they contribute to the plan.
While 401k plans are not perfect, they are an effective way to accumulate wealth while receiving significant tax benefits. And if your company offers a matching contribution and you still aren’t participating, you’re leaving free money on the table.
Sixty-four percent of workers are not too or not at all confident that Social Security will continue to provide benefits of at least equal valued to the benefits retirees receive today.
I’m only 35, so I have a long way to go before I’m eligible for Social Security. Will the program even exist when I’m ready to retire? Probably, in some form or another. But who knows what the government will do over the next 30 years.
I think it’s best to hope for the best but prepare for the worst. My goal is to build enough wealth to retire without having to rely on Social Security at all. That way whatever benefits I do receive will be gravy.