by Michelle Singletary
WASHINGTON -- Two just-released surveys find that a record number of workers have lost faith in their ability to afford retirement.
The 2011 Retirement Confidence Survey conducted by the nonpartisan Employee Benefit Research Institute (EBRI), the American Savings Education Council, and Mathew Greenwald and Associates found that more than a quarter of workers are "not at all confident" about having enough money to live comfortably once they retire. This is the highest level of pessimism among respondents in the two decades EBRI has been doing the survey.
One reason people are doubtful is because of the unknown. Forty-two percent of those polled said they're just guessing as to what they will need in retirement.
In a second survey, half of the folks said they didn't think it was possible that a typical middle-income family could save for a secure retirement. In that same survey by Country Financial, which provides insurance and retirement planning services, 43 percent of respondents said they had no confidence in their current retirement savings plans. And yet, the same percentage said that in this economy, they have had to decrease the amount they are putting away for this eventuality.
The results of these surveys probably don't surprise you. It's part of the constant drumbeat that we all need more money to live an idyllic retirement. But as EBRI points out in interpreting its survey numbers, perhaps it's long overdue that we redefine what retirement means when weighed against high unemployment rates; politicians who can't balance the federal budget; state and local government fiscal crises; high health care costs; lower investment returns, and, most importantly, the fact that people are living longer, putting pressure on Social Security and Medicare.
We are entering an age of the new normal for transitioning from work to retirement, the authors of the EBRI retirement survey proclaim. "People's expectations need to come closer to reality so they will save more and delay retirement until it is financially feasible," said Jack VanDerhei, EBRI research director and co-author of the retirement report. VanDerhei hit on the key word when it comes to retirement planning -- expectation.
Certainly many people could save more but what if they can't or won't?
In the new normal for retirement, here are the rules:
Work longer or don't retire at all. I've heard a lot of people who haven't a clue what they need in order to retire comfortably, announce they are going to retire early nonetheless. This is just nonsense. That kind of thinking will have you broke and living in your kid's house in the basement or in a back room in no time.
For many, the new normal is giving up on the notion of retiring at an age south of 65 and living large. A significant number of workers in the EBRI survey (20 percent) say they now intend to retire at an older age than they had planned. However, you also need to plan on the fact that you might not be able to delay retirement. Almost half of current retirees in the EBRI survey said they retired earlier than expected, mainly because of a health problem or disability.
Adjust your expectations. If you can't work later in your senior years and you haven't saved enough for retirement, you may not be able to move to Florida or travel as much as you had planned. You may have to rent out a room or live with someone else. That doesn't mean you aren't living comfortably. Old or young, many people have to get rid of their sense of entitlement. So drop the attitude of what kind of retirement you deserve.
Stop guessing. Workers who calculated a retirement goal amount report that they end up saving or investing more, according to EBRI.
I'm often asked: "How much should I be saving for retirement?" Stop looking for a one-size-fits-all percentage or dollar figure. How much you'll need in retirement will vary depending on your own situation. Some retirees, who want to live lavishly, will have to save enough to replace 80 percent to probably 100 percent of their pre-retirement incomes. Others might be able to get away with 50 percent or less of what they used to earn. In retirement, my grandmother, Big Mama, lived on much less than what she made before she stopped working because she lived frugally -- pre- and post-retirement. She also paid off her mortgage before she retired, eliminating a major expense in her budget.
Perhaps it's a good thing people are so pessimistic. Maybe that will lead them -- or you -- to not just fret about retirement but to better prepare for it.