Myths of Retirement Planning

The annual Retirement Confidence Survey generated more news and commentary this year than usual. One reason is that it reveals Americans are less confident about having a financially comfortable retirement than ever. Another reason is that it indicates many people simply have given up saving and planning for retirement.

A good commentary is here. It identifies one big lie and one big fantasy about retirement among Americans. The big lie is that people now are saying they can’t save for retirement because of their other obligations. The fact is most people can save another $25 weekly simply by reducing dining out or some other nonessential expense. The big fantasy is that people will work longer. As I’ve reported in the past, close to half of current retirees retired before they planned and for reasons out of their control. People who base their retirement plans on working longer are taking a big risk.

Only 57 percent of workers are actively saving for retirement, according to the survey, down from 65 percent in 2009.

Employees eligible to contribute to 401(k) or similar savings plans at work cited the cost of living and day-to-day expenses as the top reasons why they don’t invest in those plans or don’t invest more. Roughly 1 in 5 (18 percent) said they cannot afford to save more. Workers age 45 or older who aren’t confident about having enough money for a comfortable retirement said they think they need to save an (absurdly high) average of 43 percent of their income.

But the head of Mathew Greenwald & Associates, the research firm that conducts the annual survey, says Americans’ explanation for their saving troubles is “not really true.”

Greenwald says that in previous surveys when people were asked if they could afford to save $25 a week more for retirement or start saving $25 a week, most said they could. When asked what they’d have to give up, Greenwald says, “the main thing cited was eating out.” Others identified various “minor ways of cutting back,” he adds, like spending less on entertainment, clothes and impulse buys.