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Tuesday, April 14, 2009

Retirement prospects look poor

An article in the Wall Street Journal today highlighted that those in or preparing for retirement are less confident than ever.

Only 13% of workers say they are very confident about having enough money to retire comfortably. That's a record low.

This is not a surprise considering that 49% of people 55 and older have saved less than $50,000. That's so far short of what's needed as to be outrageous. That could pay out around $4,400 a year over 30 years assuming an 8% return. Nowhere near enough money.

Those retired or going to retire over the next decade or two may at least have the benefit of social security and perhaps a pension. Younger folks should know that social security will be so far insolvent as to be unavailable to everyone.

Hope is not a strategy.

Only 25% of workers are highly optimistic about covering food and housing costs in retirement. That means 75% of people know--absolutely KNOW--they can't take care of themselves in retirement. Stunning!

For those currently retired, only 20% are confident about being able to afford a secure retirement. Only 25% say they have enough for medical expenses. Only 34% are optimistic about covering basic expenses. That means two-thirds of retirees believe they can't pay for the basics. Unbelievable!

On the bright side, workers are doing something to change their situation. They are cutting spending, working more hours, saving more, and talking to a financial professional. I hope they get good advice.

One major problem is that so many believe they can work longer to postpone retirement. But, 50% of current retirees left the workforce sooner than they expected because of health problems, downsizings or obsolete skills. Counting on working longer is not a solution.

Also, two-thirds of workers planned to work after retiring, but less than 35% actually ended up being able to work. Hoping to work more is not necessarily a viable option.

What do people need to do? They need to save more. They need to invest that money wisely. They need to think hard and independently about the amount of money they will need and why. They need to plan to take care of themselves, not hope that things "work out." Hope is not a strategy. Hope for the best, plan for the worst.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

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