Real Life Retirement

According to a Real Life Retirement survey by Charles Schwab & Co, Inc., investors still remain uncertain about the future of the economy. More than half expect another dip before the stock market settles. When asked to choose which had top priority: growing retirement savings or protecting their savings, 46 percent are focused on growing savings, only 29 percent on protection.

The focus on growth is even more pronounced among younger workers. More than half of Americans ages 18-32 (58 percent) and 33-44 (54 percent) consider multiplying retirement assets their top priority.

More men than women (50 percent vs. 43 percent) think it’s most important to boost their current retirement savings while women are more likely than men (32 percent vs. 26 percent) to concentrate on protecting the savings they already have.

401(k) Balance

Before the financial crisis, the average 401(k) balance for workers nearing retirement was $78,000. After the market reached its recent nadir, the average hit $56,000, according to researchers at the Boston College Center for Retirement Research.

Target-Date Funds

The great advantage of target-date funds, is that they automatically move people from stocks into safer investments, like bonds, as they approach retirement. They are sometimes called life-cycle funds.

Approximately 70 percent of all employer-sponsored 401(k) plans offer them. But they represent only 7 percent of all 401(k) assets.

Retirement Readiness Index

Most American workers are better set to retire than they think they are, according to a new retirement readiness index prepared by Fiduciary Benchmarks.

Fiduciary complains that fear-mongering has been part of the “retirement readiness” landscape because companies that make money selling investments also make a regular practice of floating surveys that allege "workers are woefully unprepared and should save more." According to a spokesperson for fiduciary: "If you take the passion and the fear-mongering out of it, it is possible to retire on schedule."

Fiduciary’s Retirement Readiness Index is derived from a non-fear-mongering methodology. It is based on corporate tax filings to determine how much money was actually in workers' 401(k) accounts, and extrapolated Social Security benefits from salary information.

The methodology draws on a few assumptions. It assumes workers will work until they are 67; that their companies will match 3 percent of their 401(k) contributions; and that Social Security benefits will continue without cuts.

Two Years and the OPM Glitch Is Not Fixed

A glitch in the federal retirement system affecting as many as 12,000 retirees will be fixed by mid-April, according to the Office of Personnel Management (OPM). OPM has been working since 2008 to fix its Service Credit System, which calculates retirement annuities for those who either did not contribute to the retirement fund during a certain period, or those who received a refund of retirement contributions.

It currently takes OPM from five to 40 business days to complete an annuity calculation request because officials must determine payments manually. Fixing the OPM glitch will trim turnaround tremendously.

Reasons to Keep On Working

The economy continues to change the retirement timeline for many mature workers, leaving them with tough decisions about their futures.  More than seven-in-ten (72 percent) workers over the age of 60 who said they are putting off their retirement are doing so because they can't afford to retire financially, according to a new survey by CareerBuilder.

Financial reasons are not the only grounds for postponing retirement for workers over the age of 60. Other reasons cited include they:  

• Either enjoy their job or enjoy where they work and don't want to leave it (71 percent)
• Plan to stay because they need the health insurance and additional benefits provided (50 percent)
• Fear retirement may just be boring (24 percent)
• Enjoy feeling needed (15 percent)

Tips for Postponing Retirement

PrimeCB.com, CareerBuilder's job site for mature workers, offers tips for those workers who may be planning to postpone retirement:

“Talk to your HR department – Keep an open and honest dialogue with your company as soon as you decide what to do about your retirement. HR can be a good resource if you are having trouble mapping out your future.

“Be open minded – Your employer may have been working around a pre-determined date you set. Therefore, deciding abruptly that you want to stay in the same job may not be in the cards.  Talk to supervisors and if you have already been replaced on one assignment, determine what other projects may be a good fit for you.

“Network. Network. Network. – While you try to figure out if you can stay with your current employer, it is in your best interest to network socially and professionally to see if anyone knows of any other positions for which you should apply. If your goal is to have a job, your network may be able to help you find a new one.

“Mentor inside and outside your company – One of your greatest assets is your experience level and intellectual capital. Leverage this knowledge as a mentor to show your worth to your current employer and those you may work for in the future.”

Dependence on Social Security

Alicia Munnell, director of the Center for Retirement Research at Boston College,  points out in an interview with National Public Radio, that a third of all workers will likely end up depending on Social Security for all of their retirement income. Only half the people are covered by any type of employer-provided plan.

A Savings Ballpark

Roger Ferguson of TIAA-CREF points out in an NPR interview that people need to save between 10 and 14 percent of their pre-retirement gross income to have a reasonable income replacement when they retire.

Missed Expectations

According to the Schwab study, retirement savings don't always match expectations. While nearly three in 10 investors agreed they should contribute 10 percent of their income to retirement, twice that number – 60 percent – are allocating less. Twenty percent are currently saving nothing at all.