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Status on America's retirement

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At the same time, so-called life-cycle or target date funds enable even novices to invest shrewdly. Available in 49 percent of all 401(k) plans -- up from 12 percent back in 1996 -- these funds automatically allocate investment options based on someone's age or particular savings target. No surprise, then, that two-thirds of individuals tell EBRI they would welcome life-cycle options in their plans.

Even with financial mistakes, retirees' happiness generally ranks high. Three-quarters of retirees say they live very or fairly comfortably, Fidelity found. And nearly half of retirees (49 percent) say they're extremely or very satisfied.

An expensive variable
There's one thing that casts a long shadow on retirees' happiness and finances: health care expenses.

"Health is a variable that's really hard to control for a significant number of Americans," says Fidelity's Guy Patton.

A couple in their mid-60s will spend an estimated $215,000 on out-of-pocket medical expenses, excluding long-term care, by the time they're 85, Fidelity reports. Poor health disrupts earning power, too. That's bad news for 63 percent of wage earners who tell Fidelity they expect to extend their working lives to save more. In fact, 55 percent of current retirees left jobs one to five years earlier than planned. Among them, 22 percent left due to illness or disability. Half of those with poor health say they're barely able to make ends meet.

Those who are able to work longer often reap rich financial benefits.

Today, 7 million Americans age 61 and older have returned to work within 18 months of retiring, Putnam Investments reports. And this "second chapter" has enabled many to reap financial rewards. Retirees who return to work generally save a hefty 11 percent of earnings and report household incomes of $86,000 on average, far more than the $54,200 for nonworking retirees.

Meanwhile, workers seem bullish about their prospects, too.

Fidelity found that 53 percent expect a "very" or "somewhat" comfortable retirement. Meanwhile, EBRI reports that 27 percent of workers are "very confident" they'll have enough for a comfortable retirement, and an additional 43 percent are "somewhat" confident they'll be financially secure. It's difficult to tell whether their optimism is rooted in good money habits or wishful thinking. For example, 49 percent of workers who haven't saved a penny for retirement nevertheless feel confident that they'll live comfortably in retirement, EBRI found.

Still, experts see glimmers of hope.

"We are seeing higher levels of engagement. That's very encouraging," says Boston College economist Tony Webb. "Add in the effects of automatic enrollment, auto savings increases so people are taking full advantage of employer matching funds and the use of life-cycle funds to help with diversification -- it's all helpful."'s corrections policy -- Updated: Oct. 1, 2007
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