Post by jeffolie on Sept 29, 2011 12:14:29 GMT -6
Retirement at risk
Most are way behind, lack skills to plan life after work
It wasn't so long ago that retirement meant a well-earned ticket to Easy Street.
You took the gold watch, filed for Social Security and started collecting your pension. Then you puttered around the house you worked 30 years to pay off; maybe even took a cruise each winter.
Today, that's nothing more than fantasy for tens of millions of Americans.
That is, unless they do something radical real soon, experts say. Studies show that most Americans are nowhere near their "magic number," the amount a person needs to have saved for even a basic retirement. Most will struggle to pay for shelter, food and medical care and have little left for the leisure, travel and comfort of their dreams.
Consider these findings:
Only 4 percent of middle-income married couples nearing retirement without an employer-provided pension are likely to have enough money to last their lifetime, according to a 2009 report by Ernst & Young. One measure puts that figure at 10 times their salary -- $750,000 for someone making $75,000.
Some 51 percent of households headed by those ages 55 to 64 face a retirement with lower living standards, according to a 2009 study by the Center for Retirement Research at Boston College.
More than half of all U.S. households hadn't saved a penny in their 401(k) retirement accounts and the median 401(k) balance was just $34,000, Pew Charitable Trusts found in 2004. And that was before the recession devastated investments, housing values and net worth.
"A big chunk of this country -- almost half -- doesn't have enough saved," is the grim conclusion of Dan Greenshields, president of ING Direct Investing in Wilmington.
It gets worse.
Today, with more and more companies ending pension plans and shifting to worker-managed 401(k) plans, and Congress thinking about limits on Social Security benefits, responsibility for achieving that personal magic number increasingly falls on individuals.
Yet, the National Bureau of Economic Research found in 2009 that more than half of American adults have done no retirement planning.
Changing times
Retirement used to be a whole lot easier.
Most employers provided a defined pension. The firm put aside a certain amount for each employee in a pension fund and told workers how much they could plan to collect each month when they retired.
Today, most companies have shifted to 401(k) retirement accounts -- plans allowing employees to set aside a tax-free percentage of their income into a retirement savings account. Most companies "match" that contribution up to a certain point.
That has changed the game completely.
With a pension, retirement income was set, and workers knew what their pension payout would be. The company invested the money so the fund would be big enough to provide the payouts when workers retired.
But with 401(k) plans, that responsibility shifts to employees. Workers must figure out what retirement income they will need, how big a nest egg they must build up to reach their "magic number," one that will produce enough income each month for as long as they live. Then they must calculate what paycheck deduction is enough to get there.
And they must monitor the 401(k)'s performance to make sure they stay on track.
So far, the shift to employee-managed retirement planning is a flop.
Some have dutifully saved; some procrastinated. Of the workers who have an employer-sponsored plan available to them, 23 percent choose not to participate at all, according to 2003 data from the Employment Benefit Research Institute (EBRI).
On average, just about half of workers at medium and large U.S. companies are taking part in a defined contribution plan such as a 401(k), according to the Bureau of Labor Statistics.
And many who do have 401(k) plans were rocked by the 2008-2009 recession.
Unfortunately for many, the unpredictable events of life -- illnesses, crises, expenses -- have made saving difficult.
Homeownership, once the bedrock "nest egg" for millions, has been undermined by the real estate collapse. Since their peak in 2006, home prices are down by about 30 percent.
Many families won't have their homes fully paid off by the time they retire.
In 2007, 32 percent of households headed by someone age 65 to 74 were carrying home mortgage debt, and nearly 19 percent of households headed by those 75 and older had a mortgage, according to the Federal Reserve Survey of Consumer Finances.
Many couples relying on double incomes have been disrupted by layoffs, and wages for many workers have failed to keep pace with the rise in prices over the last decade.
"All of a sudden, household incomes were cut in half; just to keep the lights on is a struggle"
Recent financial pressures have prompted many to tap into their 401(k) savings -- 21 percent of savers in plans with a loan option now have loans outstanding, up from 18 percent at the end of 2008 and 2007. The number of such borrowers reached a 10-year high in the second quarter of 2010, according to Fidelity.
Among those who have 401(k)s or some other retirement account, many don't even know what's in it.
Nearly 24 percent of Americans over 65 have incomes below the poverty threshold, according to the Organisation for Economic Co-operation and Development.
More than 66 percent of today's baby boomers say they intend to work at least a year longer than they had planned in 2007. Workers are now more than twice as likely to say they must wait until age 70 to retire..
"The research also shows that even if a worker delays his or her retirement age into their 80s, there is still a chance the household will be 'at risk' of running short of money in retirement," ...
www.delawareonline.com/article/20110925/BUSINESS/109250333
Most are way behind, lack skills to plan life after work
It wasn't so long ago that retirement meant a well-earned ticket to Easy Street.
You took the gold watch, filed for Social Security and started collecting your pension. Then you puttered around the house you worked 30 years to pay off; maybe even took a cruise each winter.
Today, that's nothing more than fantasy for tens of millions of Americans.
That is, unless they do something radical real soon, experts say. Studies show that most Americans are nowhere near their "magic number," the amount a person needs to have saved for even a basic retirement. Most will struggle to pay for shelter, food and medical care and have little left for the leisure, travel and comfort of their dreams.
Consider these findings:
Only 4 percent of middle-income married couples nearing retirement without an employer-provided pension are likely to have enough money to last their lifetime, according to a 2009 report by Ernst & Young. One measure puts that figure at 10 times their salary -- $750,000 for someone making $75,000.
Some 51 percent of households headed by those ages 55 to 64 face a retirement with lower living standards, according to a 2009 study by the Center for Retirement Research at Boston College.
More than half of all U.S. households hadn't saved a penny in their 401(k) retirement accounts and the median 401(k) balance was just $34,000, Pew Charitable Trusts found in 2004. And that was before the recession devastated investments, housing values and net worth.
"A big chunk of this country -- almost half -- doesn't have enough saved," is the grim conclusion of Dan Greenshields, president of ING Direct Investing in Wilmington.
It gets worse.
Today, with more and more companies ending pension plans and shifting to worker-managed 401(k) plans, and Congress thinking about limits on Social Security benefits, responsibility for achieving that personal magic number increasingly falls on individuals.
Yet, the National Bureau of Economic Research found in 2009 that more than half of American adults have done no retirement planning.
Changing times
Retirement used to be a whole lot easier.
Most employers provided a defined pension. The firm put aside a certain amount for each employee in a pension fund and told workers how much they could plan to collect each month when they retired.
Today, most companies have shifted to 401(k) retirement accounts -- plans allowing employees to set aside a tax-free percentage of their income into a retirement savings account. Most companies "match" that contribution up to a certain point.
That has changed the game completely.
With a pension, retirement income was set, and workers knew what their pension payout would be. The company invested the money so the fund would be big enough to provide the payouts when workers retired.
But with 401(k) plans, that responsibility shifts to employees. Workers must figure out what retirement income they will need, how big a nest egg they must build up to reach their "magic number," one that will produce enough income each month for as long as they live. Then they must calculate what paycheck deduction is enough to get there.
And they must monitor the 401(k)'s performance to make sure they stay on track.
So far, the shift to employee-managed retirement planning is a flop.
Some have dutifully saved; some procrastinated. Of the workers who have an employer-sponsored plan available to them, 23 percent choose not to participate at all, according to 2003 data from the Employment Benefit Research Institute (EBRI).
On average, just about half of workers at medium and large U.S. companies are taking part in a defined contribution plan such as a 401(k), according to the Bureau of Labor Statistics.
And many who do have 401(k) plans were rocked by the 2008-2009 recession.
Unfortunately for many, the unpredictable events of life -- illnesses, crises, expenses -- have made saving difficult.
Homeownership, once the bedrock "nest egg" for millions, has been undermined by the real estate collapse. Since their peak in 2006, home prices are down by about 30 percent.
Many families won't have their homes fully paid off by the time they retire.
In 2007, 32 percent of households headed by someone age 65 to 74 were carrying home mortgage debt, and nearly 19 percent of households headed by those 75 and older had a mortgage, according to the Federal Reserve Survey of Consumer Finances.
Many couples relying on double incomes have been disrupted by layoffs, and wages for many workers have failed to keep pace with the rise in prices over the last decade.
"All of a sudden, household incomes were cut in half; just to keep the lights on is a struggle"
Recent financial pressures have prompted many to tap into their 401(k) savings -- 21 percent of savers in plans with a loan option now have loans outstanding, up from 18 percent at the end of 2008 and 2007. The number of such borrowers reached a 10-year high in the second quarter of 2010, according to Fidelity.
Among those who have 401(k)s or some other retirement account, many don't even know what's in it.
Nearly 24 percent of Americans over 65 have incomes below the poverty threshold, according to the Organisation for Economic Co-operation and Development.
More than 66 percent of today's baby boomers say they intend to work at least a year longer than they had planned in 2007. Workers are now more than twice as likely to say they must wait until age 70 to retire..
"The research also shows that even if a worker delays his or her retirement age into their 80s, there is still a chance the household will be 'at risk' of running short of money in retirement," ...
www.delawareonline.com/article/20110925/BUSINESS/109250333