Pessimism about Retirement

Workers are more pessimistic about their chances for a comfortable retirement than at any time in the past two decades, according to a survey released earlier this week.

More than one-fourth of workers now say that they are "not at all confident" about retirement, up 5 percentage points from a year ago, according to the 2011 Retirement Confidence Survey from the Employee Benefit Research Institute.

The survey also found that roughly a third of workers and retirees said they had to dip into their savings last year to pay for basic expenses.

"People are increasingly recognizing the level of savings realistically needed for a comfortable retirement," said Jack VanDerhei, the institute's research director, in a statement. "We know from previous surveys that far too many people had false confidence in the past. People's expectations need to come closer to reality so they will save more and delay retirement until it is financially feasible."

Many economic conditions are forcing people to redefine when they retire and with how much money, according to the survey. These include high unemployment, government fiscal crises, rising health care costs, lower investment returns and longer life expectancies.

The survey found:

• While 59 percent – down from 65 percent in 2009 – of all workers say they are saving for retirement, more than half say they have less than $25,000 in savings and investments.
• About a third say they will need less than $250,000 to afford a comfortable retirement.
• Workers are evenly split about being confident about having enough money to take care of medical expenses during retirement.
• Two out of every five workers say they determined their retirement savings needs by guessing.

Here's something even more scary than guessing about how much money you need for retirement: Three out of every 10 workers say they have savings less than $1,000 for retirement.

So, how much do you need for retirement?

Thirty-nine percent of workers think they need to accumulate at least $500,000 by the time they retire to live comfortably in retirement. Another 19 percent feel they need between $250,000 and $499,999, while 31 percent think they need to save less than $250,000.

Workers who have conducted a retirement need calculation are more than twice as likely as those who have not (25 percent vs. 10 percent) to expect they will need $1 million for retirement.

How much you need depends on your circumstances, obviously, such as where you plan to live and what you plan to do during retirement. But the numbers are still eye-opening as to where America's midlifers stand in terms of preparing for retirement.

The study also proves a point that I've emphasized earlier – it pays to participate in your company's retirement plan. Workers who participate in a retirement savings plan at work are more than twice as likely than those who have been offered a plan but chose not to participate to have saved at least $50,000 for retirement.

When compared to last year's survey – this is the 21^st year this survey has been conducted – the biggest changes appear to be in attitudes about retirement, not in actual savings.

I think we all know that as we look toward retirement, we've got work today. The survey just quantifies how much work is left.