2009Oct2 How Is Your Retirement?

 

When you retire do you think you will have enough money to live comfortably?

Respondents were equally divided on this question. The 50% that answered no will have more difficulty ahead as they face longer working careers or reductions in their retirement lifestyle.

 

Do you expect to rely on a 401(k), IRA, Keogh or other retirement savings account as a major source of income?

These responses surprised us. Only 41% expect to rely on a retirement savings plan as a major source of retirement income. This may be due to the reduction in value caused by this past year’s market losses or the absence of a plan. We expected a higher reliance due to the emphasis on marketing company retirement plans over the past twenty years.

 

Do you expect to rely on part time employment as a major source of income?

Again, respondents were equally split on working during retirement. This is a cultural change that has happened because of our shift from jobs requiring physical strength to service and intellectual employment. As a result, many of today’s jobs no longer have a mandatory retirement date. With healthier people living longer, it should not be a surprise to see people working longer. It takes a good sum of money to fund a 30 to 40 year quality retirement.

 

Do you expect equity in your home to be a major funding source for retirement?

The respondents to this question are probably the same ones that do not expect a retirement plan to be a major source of income since the percentages are identical. Just over 41% expect their home equity to fund retirement income. As we have discussed at length on our radio program, real estate values are down significantly and likely to stay down for more than a decade. Hopefully, these individuals are young and have the time to wait for recovery in home values.

 

Do you have a company pension plan that will provide a major source of retirement income?

Only 8% of respondents have a company pension plan that will be a major source of retirement income. This is not surprising since the 1987 Tax Reform Act, pension plans have been systematically phased out by business for employee directed accounts such as the 401k plan. Pension plans remain underfunded which is a liability for the businesses still sponsoring them. As businesses fail, pension plans are turned over to the PBGIC which restructures benefits to match the available funding. That is always a lower retirement benefit than the employees were expecting.

 

The reality of pension plan participants today is that they are responsible for their own retirement. 92% of our respondents acknowledged this.

 

Do you expect to be able to rely on Social Security for part of your retirement income?

Slightly less than 60% of respondents expect Social Security to survive and provide for part of their retirement income. We assume the skeptics are probably the younger respondents who doubt that the government will straighten out the deficits in Social Security funding and have to reduce benefits in the future or at least adjust benefits to an individual’s need for income supplement.

 

Is a winning lottery ticket your major source of funding for retirement?

We asked this question because of the ads run by the state lottery. Twenty five percent responded in the affirmative. We assume, or at least hope that they are aware of the ad and have fun by spoofing us with their answer. We are wishing them lots of good luck. If they are serious about the lottery funding their retirement, they are certainly not aware of the odds that their plan will be a failure. The odds of dying from starvation in the U.S. are greater than the odds of winning a lottery.