Workers see comfortable retirement

But many in U.S. are not saving funds, survey shows

April 05, 2005|By Lorene Yue | Lorene Yue,CHICAGO TRIBUNE

If only Americans could bank on overconfidence to fund their golden years.

Sixty-five percent of workers surveyed by the Employee Benefit Research Institute said they were very or somewhat confident that they will have enough money to live comfortably throughout retirement.

What's surprising about these numbers, part of the institute's annual retirement confidence survey released today, is that 20 percent of the very confident participants aren't currently saving funds for the future. Instead, they're banking on money from their company, job or financial acumen to carry them through retirement.

As for those who are setting aside funds, financial experts fear retirement-income expectations for many workers are out of line.

"If your target is unrealistically low, then you'll likely be overconfident," said Dallas Salisbury, president and chief executive officer of the Washington-based institute. "Only 40 percent said they had done a full calculation of what they need in retirement." A third of those came up with their own estimate as opposed to having a financial adviser crunch the numbers.

Based on the report, which interviewed 1,253 Americans age 25 and older, more than half said the total value of their investments and savings, not including the value of their primary home, was less than $25,000.

This is no longer an environment when company pension plans and Social Security all but ensured a steady stream of retirement income. Now, the burden has shifted to workers as corporate America began replacing costly pension programs with participation plans such as the 401(k).

Many workers lack the expertise to manage their funds.

"They're overwhelmed and afraid," said Nancy Coutu, president of Money Managers Advisory in Oak Brook, Ill. "People feel very incompetent and unprepared. I see more people, younger than ever, if they are contributing [to a 401(k) plan at all], they are putting it into a money market account."

Most workers blame daily expenses, child-related costs and medical expenses for delaying their savings progress.

But financial experts said that if many Americans re-evaluated their spending habits, particularly on discretionary items, they could find more dollars to allocate for the future. Two-thirds of the workers surveyed said they eat at a restaurant or order takeout at least once a week and more than half hit vending machines once a week or more for meals.

Most workers, 82 percent, participate in their company's retirement savings plans. Seventy-two percent of those who don't participate said they are more likely to enroll if their employer matched up to 5 percent of their salary.

One solution to get more workers to participate in company 401(k) programs is the advent of automatic enrollment, where employees have to opt out instead of the current model of opting in. Most automatic enrollment programs have a default fund and contribution level.

The Chicago Tribune is a Tribune Publishing newspaper.

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