StoryImage( ‘/Images/Story//Auto-img-118538935529346.jpg’, ‘Image courtesy of http://news.minnesota.publicradio.org‘, ‘Only 27 percent of workers age 40 and older are confident they will have enough money to live comfortably through retirement‘);
Lifetime financial security is a cornerstone of the American dream, but it is a dream that is becoming harder to realize for many Americans reaching retirement age. Only 50 percent of families have saved money of any kind for retirement, and the typical family has saved less than $35,000.
Are Americans simply unconcerned about saving for retirement or over-confident about their lifetime financial security? No. Only 27 percent of workers age 40 and older are confident they will have enough money to live comfortably through retirement, and less than one-third of these individuals are confident they are doing a good job of preparing for retirement.
Its easy to believe younger workers arent prepared for retirement, but what about those nearing retirement age? Surely they are more confident in the size of their nest egg? Not true. In fact, only 25 percent of baby boomers feel they are prepared for retirement.
People are simply finding it more difficult to save for retirement, frequently relying on Social Security as a main source of retirement income. Nearly two-thirds of current retirees rely on Social Security for most of their income; however, Social Security only replaces about 40 percent of an individuals pre-retirement income.
To retire comfortably, the average-income American needs to replace, at a minimum, 70 percent of their pre-retirement earnings. So where is that extra 30 percent going to come from?
Years ago, employer-sponsored pensions guaranteed a secondary source of retirement income. However, traditional pension plans are disappearingonly one out of five workers today has a pension plan. Defined contribution plans, such as employer-sponsored 401(k) plans, are a great way to build an adequate nest egg, but studies show that three out of 10 employees choose not to participate in these employer-sponsored savings plans.
So what can we do to build an adequate nest egg for our active, post-retirement years? Employers have the opportunity to help employees save for retirement by offering automatic enrollment in 401(k) plans. Automatic enrollment eliminates several of the stumbling blocks to employee participation in 401(k) plans, and employees can opt-out at any time. With pensions disappearing at an alarming rate, defined contribution plans are quickly becoming the preferred method of saving for retirement.
Today, a secure retirement must be supported by four pillars: Social Security, pension and savings, continued earnings, and adequate and affordable health insurance. Each of these pillars faces mounting pressures in todays financial landscape. Will you be supported? To see where you stack up in preparing for your financial future, please visit www.aarp.org/money and use AARPs Retirement Planning Calculatora tool that allows you to estimate your financial readiness for retirement. And always rememberit is never too early to start planning for lifetime financial security.
The opportunities available for those nearing retirement are endless, and we can all agree that we want to live comfortably as we pursue our post-retirement dreams. To that end, we all must take personal responsibility to ensure lifetime financial security. Is your nest egg ready?
from the July 25-31, 2007, issue