A Pity Wishful Thinking Has No Monetary Value

Given all the talk of Social Security's eventual insolvency, one might expect Americans to be conscientious in saving for their old age. But there's scant evidence of any such trend in the Employee Benefit Retirement Institute's latest Retirement Confidence Survey—an annual study that might as well be subtitled, "A Lament for the Shabby Job Americans Are Doing of Saving for Their Declining Years."In polling conducted for the institute by Mathew Greenwald & Associates, just 42 percent of current workers age 25-plus said they and/or their spouses "have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement." That's too bad, as the survey also found that doing such a calculation "tends to change savings behavior"—most often by prompting people to save more. Even among those who have tried to compute what they'll need, just 35 percent enlisted the expertise of a financial adviser. Thirty-seven percent merely made their own estimate, "and 10 percent admit they guess." In the absence of a well-informed sense of what's needed, it's easy for wishful thinking to intrude. Sixty-six percent of workers are confident they can save what they need by the time they retire. At the same time, though, 55 percent admitted they're "behind schedule" in planning and saving for retirement. That number wouldn't seem as bad if people assumed they need a massive nest egg to fund their retirement. As you can see from the chart, though, many believe they can live off an amount that financial experts would deem insufficient. With all due respect to $250,000, it'll be stretched awfully thin if one's retirement spans a couple decades. And that's just what many Americans expect (as well they might). Among current workers, 34 percent expect to retire before age 65—including 16 percent who think they'll quit before 60. Meanwhile, half of all workers think they'll live to age 85; one-quarter of men think they'll see 89, and as many women think they'll reach 90. Asked specifically about the length of retirement they expect, 27 percent of workers think it'll last 20-24 years; 9 percent expect 25-29 years; 17 percent anticipate 30-plus years. So, how much have workers salted away? Not much, in many cases: 52 percent have less than $25,000 in savings and investments (aside from equity in their primary residence); 13 percent have $25,000-49,999; 11 percent have $50,000-99,999; 12 percent have $100,000-249,999; and 11 percent have $250,000-plus. Sixty-nine percent have saved for retirement at some point in their lives; 62 percent are doing so now. What keeps people from saving more (or at all)? Among those who concede they're behind schedule in their saving, 49 percent pointed to everyday expenses as a "major factor." Among other major factors: child-rearing expenses (cited by 39 percent), medical expenses (35 percent), car expenses (30 percent), expenses of buying/remodeling a home (27 percent) and education expenses (22 percent). A wonderfully brazen 6 percent blamed "entertainment expenses" as a major impediment to their retirement saving.

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A Pity Wishful Thinking Has No Monetary Value

Mark Dolliver

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Mark Dolliver