When it comes to their retirement, America's 50-somethings seem to be in a state of denial.
Although the recent economic downturn has forced pre-retirees ages 50 to 59 to consider working years longer than they had hoped, their current rate of savings is unlikely to fund the retirement lifestyles they expect, according to fifth-annual Retirement Fitness Survey from Wells Fargo & Company.
On behalf of Wells Fargo, Richard Day Research conducted 2,108 online surveys with pre-retirees (ages 50 to 59) and young retirees (ages 55 to 70).
Those interviewed were relatively affluent, each having at least $100,000 in household investable assets, excluding real estate.
According to the survey, only 23% of pre-retirees are saving more for retirement than they were a year ago. Most — 57% — are saving the same amount, and 20% are now saving less.
Sixty-seven percent say their expectations for retirement have changed in the past year, and 56% now expect to work longer by an average of three additional years.
"It was surprising – given the level of market disruption – that '50-somethings' didn't change much of anything with regard to their retirement planning," says Lynne Ford, head of Wells Fargo Retail Retirement. "Only one in three has a retirement plan. We'd like to see a greater number of Americans increasing their savings and more planning in the 50-somethings."
Overall, the financial positions and savings habits of this group are insufficient to last for their expected 20-plus years of retirement:
* While pre-retirees surveyed expect to need $800,000 for retirement, they have saved only $300,000 (median amounts).
* Pre-retirees clearly haven't assessed how long their savings will last in retirement. They expect to live nearly 21 years in retirement, but plan on spending nearly 10% of their savings every year in retirement. The industry recommendation is to withdraw no more than 4% annually.
* People have been overly optimistic about their investment returns. When they started saving (typically in their 30s), both pre-retirees and retirees expected the value of their investments to grow by 8.7% each year, on average. In fact, the compound annual growth rate of the S&P 500 from 1958 through 2008 was 6.6%.
