Worried about retirement savings? You're not alone

by Jim Sloan

If you find yourself obsessing over your retirement savings accounts and investments, you're not alone.

A recent Gallup Poll found that retirement savings are the top-rated financial concern for Americans--higher than more immediate concerns such as paying for a child's college, making a minimum credit card payment or coming up with the money to pay monthly bills or a mortgage.

Gallup has been conducting an annual survey of Americans' economic concerns for 10 years, and the just-completed poll showed that 66 percent of us are worried about not having enough money saved for retirement. That number is higher than the 53 percent who had this worry in 2001, and the poll found that the worries reach across economic boundaries; 69 percent of those making less than $30,000 a year are worried about retirement savings accounts and 68 percent of those making more than $75,000 are worried.

Concerns about medical costs, standard of living

Here are some other findings from the survey:

  • 60 percent of those surveyed--the second-highest percentage--said they are worried about not being able to pay medical costs for a serious illness.
  • 58 percent said they were worried about not being able to maintain their standard of living.
  • Nearly half--48 percent--said they are worried they won't have enough to pay medical costs for normal health care.
  • The lowest percentage--24 percent--were worried about not being able to make the minimum payments on their credit cards.

Trend in fear

During the last decade, retirement, health care costs and standard of living have consistently been the top-three worries in Gallup polls. The percentage of people who are very or moderately worried has gone up significantly since 2001 in all three categories, Gallup said, and consumers' fears have inched up in all areas during the recent recession.

Retirement savings accounts

Gallup noted that the recent recession hammered many Americans' retirement savings accounts and investments. Having enough in their retirement savings accounts has led the list of concerns from the beginning, but the percentage of those worried about it has jumped since 2008.

Surprisingly, the greatest concern is among those between 30 and 49 years old. In that group, 77 percent are worked up about not having enough in their savings accounts, and investments to pay for retirement. Among those between 50 and 64 years old, 70 percent are worried that they haven't set aside enough to pay for a comfortable retirement. Those older than 64 are the least worried, with only 45 percent saying they are concerned.

Those aged 30 to 49 increasingly believe they won't have Social Security benefits by the time they retire and will have to rely exclusively on their personal savings accounts.

The percentage of Americans worried about maintaining their standard of living--58 percent--reached a new high after skyrocketing during the recession. Just three years ago, only 41 percent were worried about maintaining their standard of living.

Many employees plan to continue working past retirement age, survey finds

by Jim Sloan

A shrinking number of American workers are confident of being able to live comfortably in retirement, and many say they now plan to continue working into their 70s.

That's the findings of a new survey from the Transamerica Center for Retirement Studies in Los Angeles, which surveyed more than 4,000 workers employed at for-profit companies with 10 employees or more.

The survey found that nearly 40 percent of the workers plan to work long past normal retirement age, an increase from the 28 percent who said that in 2010, and many say they won't retire at all. Those workers blame the recession for their circumstances.

Why they need jobs

More than half of the workers said they'll continue to work after retirement, mostly because they don't think they have enough in their savings accounts to be able to afford a full retirement. Some said they'll work because they need the health benefits.

The sobering survey results comes on the heels of a recent study that showed the average 401(k) savings accounts in the U.S. has climbed to nearly $75,000, up from $71,5000 at the end of 2010, the highest amount recorded since 1998. That analysis from Fidelity found that 401(k) savings accounts investments have grown 58 percent since 2009.

But even as 401(k) investments have grown, the percentage of workers confident they'll enjoy a comfortable retirement has fallen from 59 percent in 2007 to 51 percent this year.

People aren't saving enough

Part of the problem might be a statistic noted by Pensions & Investments magazine, which reported that only 78 percent of the employees in the survey were participating in a defined contribution plan when their employer offered them one. The survey founded that 25 percent of the respondents did not have access to workplace savings accounts of any kind.

The survey revealed a big gap between what retirees feel they'll need in retirement and what they've saved in their investments. The median amount workers said they needed in their savings account, money market account, 401(k) or IRA was $600,000, but only 30 percent said they have more than $100,000 in their retirement savings accounts. Nearly 90 percent felt they weren't putting away enough money--be it in a retirement account, savings account or money market account. You can compare interest rates for money market accounts and savings accounts online.

Staying on the job: a good thing?

Transamerica officials both praised and lamented the fact that so many Americans intend to continue working. Working until the age of 75 instead of retiring at 65 gives you 10 additional years to sock away money into a retirement savings account and 10 fewer years of retirement to save for. And the longer you wait to retire, the higher your monthly Social Security benefits will be.

But at the same time, "planning not to retire is not a retirement strategy," Collinson said, noting that nearly 90 percent of those who plan to keep working don't have a backup plan if they lose their jobs or their health declines and they can't work. Many people in their 70s find they have to stay home to care for a sick spouse.

Successful retirees are saving 10 times their annual income, study shows

by Jim Sloan

A new study has developed an easy-to-use "retirement planning score" that gives you a simple way to track your progress toward having enough money in your retirement savings accounts to adequately finance your golden years.

The study from Lincoln Financial Group uses an assets-to-income ratio that helps you monitor your retirement savings progress throughout your professional life. This measure of your savings rates shows whether you are ahead of schedule for retirement or, more importantly, behind in your retirement investments and need to pick up the pace a little bit.

The study suggests you should save at least 10 times your annual income at retirement. The analysis is based on information gleaned from nearly 1,200 retirees, including those who became so-called "10-timers" and those who failed to achieve the best savings rates.

The 10-time retirements savings account score, which Lincoln calls its retirement power score, gives people a simple method for tracking their readiness for retirement. Researchers admitted the score is an "evolving target" that changes as your income changes through your professional life.

Lincoln, noting that only 11 percent of retirees succeed in become 10-timers, said the strategy is a simply way to encourage and "empower" people to save more for retirement.

Here's how it works

According to the Los Angeles Times, the strategy involve adding up everything in your various savings accounts, including your checking account, money market account, certificate of deposit, online savings account and retirement savings accounts--including 401(k)s.

Then you subtract all non-mortgage debt. Real estate investments are excluded from the Lincoln equation. Then you divide your net savings by your gross annual income to arrive at your score.

For instance, say your gross annual salary is $50,000 and you have $180,000 in a retirement savings account, $30,000 in a state pension fund and $70,000 in different individual retirement accounts. This gives you a total retirement savings amount of $280,000. You divide that amount by your annual salary and get a ratio of 5.6. Under the Lincoln formula, you would be advised to step up your retirement savings.

Other habits of 10-timers

But the Lincoln study found that successful retirees do more than save 10 times their annual salary. Among their other strategies, they:

  • Contributed to workplace retirement plans
  • Followed defined investment strategies, including relying on index funds
  • Practiced "power saving" between the ages of 30 and 40
  • Got advice from a financial professional

Just as importantly, Lincoln said there were three behaviors that the 10-timers did not rely on, including:

  • Relying on an inheritance to fund their retirement
  • Selling a primary home or making money through real estate
  • Selling a business or company stock from a former employer

Lincoln noted that many of us rely on just these types of revenue sources or investments when we plan our retirements. And though some of these practices may, in fact, help us fund our retirements, they aren't being utilized by the 10-timers who were part of the study.

Instead Lincoln advises us to not only save regularly but to increase our savings rates whenever our income or circumstances allow.

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Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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