READY TO RETIRE?
Most have started preparing, but need to save more
By Chandra Orr
Copley News Service
With corporate pensions going the way of the dinosaur, Social Security on the fritz and an economy teetering on recession, retirement can seem more than a tad daunting.
Yet Americans are still quite optimistic about their golden years.
That's the news from a recent survey of global retirement trends from AXA Equitable Life Insurance Company, a leading provider of life insurance, annuity and investment products and services.
"People are still pretty positive about retirement," said Ken Gelman, vice president and director of Consumer Insights for AXA Equitable.
"Retirement is a happy part of life. People are looking forward to it, and the findings of the study are positive in that Americans recognize that they need to take more responsibility in their own retirement planning," Gelman said. According to the study, eight in 10 working Americans say they've begun preparing for retirement, starting on average at age 30.
The survey found that major life events - getting married, having children, changing jobs - are often just the incentive people need to start saving for retirement, but milestone birthdays, like turning 30, 40 or 50, also inspire long-term planning.
"Those milestone birthdays are a time for reflection. People start taking stock in their lives. It's a time to think about getting older and do a little planning," Gelman said. "Thinking about retirement is pervasive. Americans realize that Social Security isn't going to be there for them and their company probably isn't going to provide a pension the way it did for their parents. People realize it's up to them."
Yet, while Americans are saving earlier, the study reveals that people are also working longer.
While most respondents put their ideal retirement age at 58, the actual retirement age is closer to 64 on average - and the majority of those interviewed anticipate working during retirement to supplement their savings.
This discrepancy between when people want to retire and when they actually will is somber news. It means Americans still aren't saving enough for retirement.
"The results are sobering," Gelman said. "While people are taking more responsibility for their retirement, on the flip side, they have to do more because retirement life is getting tougher.
"The analysis shows that the amount of money people are saving for retirement might not be enough. People are living much longer than they used to and Americans underestimate the number of years that they are going to spend in retirement."
A company-sponsored 401(k) is a great place to start, but chances are it won't be enough.
With advances in medical care pushing the average life expectancy ever higher, retirement is turning out to be an expensive endeavor. Gelman cites inflation, the increasing cost of health care and the increasing need for expensive long-term assisted care as the major causes.
"Americans haven't yet realized the full impact of health care costs and they haven't focused on how much the cost of living in general can escalate during retirement due to inflation."
The solution? Save more. And if you think you can't afford to save any more than you already do, Gelman has some tough-love advice.
"A lot of people say they're doing the best they can, but their best isn't good enough. Most people spend more time planning a week-long vacation than they do planning for retirement," he said. "Americans have to learn to live more frugally and defer some of their expenses."
It's a hard pill to swallow, but that may mean holding off on that flat-screen television in lieu of boosting the bottom line on your IRA.
It also means enlisting the help of professionals.
"Boomers, especially, tended to start out as do-it-yourselfers, but financial planning, especially retirement planning, is fairly complicated with a lot of issues to consider," Gelman explained.
With an increasing range of options available for funding retirement - from standard 401(k)s to annuities and reverse mortgages - the DIY approach only goes so far in fixing the problem.
If you're sick, you see a doctor. You don't try to perform knee-replacement surgery on yourself. The same holds true for retirement planning.
"The top concern should be guaranteeing that you will not outlive your assets," Gelman explained. "The more prepared you are the better your retirement is going to be. It's that simple."
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