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Status of America's retirement

Americans' dreams of retirement are more likely to resemble fitful nightmares unless they do more to plan, say numerous studies that show many workers fail to adequately prepare for life after work.

Several forces undermine their efforts to save enough. These include an erosion of traditional retirement programs that have served as financial safety nets, less-than-diligent personal money habits, skyrocketing health care costs and potentially unrealistic expectations about their ability to work long enough to boost savings.

Yet, studies contain some bright spots, too. Most individuals do save for retirement. Older workers seize opportunities to save more and do a decent job of getting back on track. Meanwhile, all workers receive more guidance, thanks to tools such as automatic 401(k) enrollment and life-cycle funds that make it easier to invest wisely.

Here's where Americans stand.

The "do-it-yourself" era of retirement
Today, retirement can stretch out for decades, bringing both the promise of extended leisure as well as a steep price tag. It's one Americans increasingly must fund themselves.

Consider that between the years 1985 and 2005, the number of major U.S. employers funding old-style pension plans on behalf of their workers dropped by nearly one-third, from 91 percent to 61 percent, Hewitt Associates reports. Qualifying for pensions by working long enough to be vested is a different matter entirely. Fidelity Research Institute estimates only 51 percent of American households expect to get a pension with median benefits of $18,000 a year.

Other polls put the percentage of pension recipients far lower. Boston College's Center for Retirement Research says 16 percent of households are entitled to defined-benefit pensions, down from 31 percent in 1983. An additional 21 percent of households will get pension benefits plus benefits from a so-called defined contribution plan such as a 401(k). That's down from 29 percent in 1983.

Though numbers differ, the trend is clear.

"The displacement of defined-benefit pension plans by defined compensation programs, of which the 401(k) is the most popular, places more responsibility on the employee," says Anthony Webb, an economist at Boston College's Center for Retirement Research. "Participation is usually voluntary. You decide how much to contribute, how to invest your funds and how to withdraw funds during the course of retirement. And those choices are opportunities to get things wrong."

Workers getting on board ... slowly
The message of do-it-yourself planning isn't lost on workers. Despite rules that generally make it pricey to cash out of them before age 59-1/2, 401(k)s are becoming cornerstones for the 47 million participants enrolled in them. That's more than twice the 21 million in private-employer pensions, the Investment Company Institute (ICI) reports.

Next: "The upshot"
Page | 1 | 2 | 3 | 4 |
Over-50 saving strategies
Surviving 'sandwich years'
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