A startling 59 percent of Americans 45 to 65 years old say they believe Social Security and their employer's pension plan will be their main source of retirement income, according to a new retirement-planning survey.
The findings of the third annual Merrill Lynch & Co. survey are out of sync with data from the Treasury Department that show Social Security and pension benefits combined account for only 35 percent of today's average retiree's income.
Many experts predict, moreover, that both Social Security and private pension benefits could become less substantial in the future when inflation is taken into account.
"It's clear to us that people 10 to 20 years from retirement are not saving enough. This group includes the first of the 'baby boomers,' who face immense financial hardship if they fail to change their saving habits," said John Steffens, executive vice president of the Merrill Lynch Private Client Group.
Perhaps that is why the percentage of those who believe they will be able to fully retire has dropped from 47 percent to 38 percent over the past three years.
Forty-three percent of the people surveyed said that they expect they will have to seek part-time work on a regular basis to supplement their retirement income.
Another 4 percent said that they expect either to work full-time on an occasional or seasonal basis or to continue to work full-time year round.
The survey also detected increased concern among prospective retirees -- compared with two previous surveys -- about retirement health-care costs, the sufficiency of retirement savings and the government's ability to provide for retirement.
In general, the Merrill Lynch survey, taken last year, revealed that there are serious inconsistencies between people's attitudes toward saving, their saving patterns and projected sources of retirement income.
For instance, people who have not yet retired remain optimistic about their future even though they are saving no more now than they were two years ago. In fact, 28 percent are saving less than they did last year, and 19 percent are allocating nothing to a retirement account, according to the survey.
"The results are really scary," says William Dennison, a Merrill Lynch spokesman.
"By the time the baby boomers retire, pensions may be a thing of the past," said Mark Prince, a retirement-planning consultant for PaineWebber Inc. He noted that many companies are switching responsibility for retirement savings onto employees through 401 (k) and other savings plans.
"It will be more and more important for the individual to take care" of himself, Mr. Prince said.
He suggested that the figure for those who said that they were not saving at all -- 19 percent -- is inaccurate. "I would be willing to bet the number is even higher."
Merrill Lynch last December surveyed 400 people who will retire between 1991 and 2012, along with 300 company benefit managers. Household incomes of those polled ranged between $20,000 and $100,000 a year.
The results are valid within a range of plus or minus 4.9 percent.
Nearly 75 percent of those surveyed said they expect their standard of living to remain the same during retirement.
PaineWebber's Mr. Prince said that will be true only for people who aggressively save for retirement.
"Only those people saving 5 to 10 percent of their annual gross income will be able to keep the lifestyle they have, or have a comfortable retirement where they won't have to supplement their income," he said.
Affording the high cost of medical bills has eclipsed nearly all other concerns among the survey respondents. Ninety-three percent said that they were concerned about how they would pay medical bills after retirement. Three years ago only 79 percent said that they were concerned. Only inflation, mentioned by 94 percent of the respondents, was a higher concern.
Company benefit managers responding to the survey reported only 34 percent of the firms offered health- or long-term-care benefits to retirees, compared with 41 percent a year ago. Four percent of those firms not offering health- or long-term-care benefits said that they planned to offer them in the future, compared with 9 percent in 1989.
Though 43 percent of pre-retirees said that they are concerned about outliving the money they've saved, nearly as many, 38 percent, say they know they could save twice as much, and 62 percent say they just save what they can and hope they'll have VTC enough for retirement. Last year, 57 percent said that they saved only what they could.
Both the survey respondents and company benefit managers said that tax incentives would help the situation.
Sixty-six percent of the individuals said that they would save more if the government provided a direct tax incentive, and 58 percent of the benefit managers said that their companies would be interested in offering retirement health-care plans if tax laws were changed to encourage pre-funding of the plans.
Sixty-two percent said that they'd be interested in offering a group longterm-care plan if the law was changed to allow pre-funding.