True retirement confidence

Posted by on May 8, 2009 @ 9:10 am in retirement

The headline from a recent survey conducted by the Employee Benefit Research Institute (EBRI) says it all: Only 13% of working Americans are “very confident” they’ll have enough money for retirement.

That’s the lowest level on record for the survey. It’s also none too surprising.

Last year, the global financial system came close to meltdown, and the economy and financial markets were in freefall. How could you not be gloomy about retirement with the world collapsing around you?

In fact, from my perspective, “retirement confidence” appears to be less an assessment of one’s retirement prospects and more a measure of current attitudes about the economy and markets. Most Americans don’t sit down and do a retirement calculation, as the survey reports. So it’s hard to say that most of us really have a solid idea what our future will be like. It’s just that an ugly environment makes our retirement prospects seem ugly, too.

The survey also contains an irony: Most Americans say they are planning to work longer, but only a small group is actually intent on saving more today.

This is a classic decision-making error. It’s the easy-out answer of the procrastinator. It always seems easier to commit to some pain tomorrow (working in retirement) than today (saving more now). Future commitments are simple to make, whether they relate to exercise, weight control, stopping smoking, or building retirement savings.

In reality, many Americans need both approaches. Working longer will ease pressures on underfunded pension systems, 401(k)s, and social insurance programs. Add extra savings during the remaining years of work—now, that combination will be the true basis of retirement confidence and retirement security.


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