50-Somethings Lack Adequate Retirement Savings, Study Warns

Women expect to retire later than men,  work in retirement "just to make ends meet"

By Stephen Miller Nov 11, 2009

The current rate of savings among U.S. pre-retirees (ages 50 to 59) is unlikely to fund the retirement lifestyles they expect, according to the 2009 Retirement Fitness Survey from Wells Fargo & Co., a financial services firm.

Results are based on 2,108 online surveys with pre-retirees and young retirees (ages 55 to 70) nationwide. Among the key findings:

Only 23 percent of pre-retirees are saving more for retirement than they were a year ago.

Most—57 percent—are saving the same amount, and 20 percent are now saving less.

67 percent say their expectations for retirement have changed in the past year, and 56 percent now expect to work longer by an average of three years.

Overall, the financial positions and savings habits of this group are insufficient to last for their expected 20-plus years of retirement, according to Wells Fargo. While pre-retirees surveyed expect to need $800,000 for retirement, they have saved only $300,000 (median amounts).

State of Denial?

Pre-retirees haven't adequately assessed how long their savings will last in retirement. They expect to live nearly 21 years in retirement but plan on spending nearly 10 percent of their savings every year in retirement. The industry recommendation is to withdraw no more than 4 percent annually.

One reason for the savings inadequacy: Americans have been overly optimistic about their investment returns. When they started saving (typically in their 30s), pre-retirees and retirees expected the value of their investments to grow by 8.7 percent each year, on average. The compound annual growth rate of the S&P 500 stock market index from 1958 through 2008 was 6.6 percent.


‘We were surprised to see how few people

have increased their rate of savings.’


But despite their inadequate savings, nearly two-thirds lack a formal plan for retirement savings or spending strategies. Only 35 percent of the pre-retirees have a written plan for retirement, and of this group, only 52 percent say they updated it in the past year during the market downturn.

"In the wake of the severe economic crisis, we had expected to find people had become more conservative in their savings and spending behavior," says Lynne Ford, head of Wells Fargo Retail Retirement. "We were surprised to see how few people have increased their rate of savings and how many people in their 50s have no retirement plan at all. For people in the last 10 to 15 years of their working career, the failure to have a thorough retirement plan in place is like driving while blindfolded."

Women More Affected by Downturn

Another key finding: Women are more likely than men to feel affected by the economic downturn and regret that they aren't better prepared.

Pre-retired women expect to retire later than they had planned (62 percent, vs. 50 percent of men), and 41 percent think they'll need to work in retirement "just to make ends meet" (vs. 32 percent of men). Women expect they will have to cut back on their retirement lifestyle (60 percent) more than men (52 percent), who feel more confident about their ability to maintain their lifestyle in retirement.

These expectations might be justified. The survey shows that:

Pre-retired women have saved less toward retirement. On average, the pre-retiree women surveyed have saved $250,000 toward retirement (vs. $300,000 for men).

More retired women than men wish they had started to save earlier in life (46 percent of women vs. 38 percent of men).

Women contribute less to their employer-provided savings plans. Women are less likely (27 percent) to be contributing the maximum to their 401(k) plans than men (41 percent).

Stephen Miller is an online editor/manager for SHRM.

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