Financial Literacy - Retirement income planning
Americans plan to work through retirement

Impact of the downturn

Diminishing savings is a real concern for many, especially since the recent downturn affected more than just stock portfolios. For instance, many people were counting on the value of their homes to buoy their finances through retirement.

How worried are you that you might outlive your money?
When asked if their withdrawal habits have changed or remained constant as a result of the financial crisis, about a quarter, or 24 percent, of retirees responded they are in fact now withdrawing more money from their savings than they had been previously.

Just 19 percent say they're withdrawing less, while 53 percent have not changed their withdrawal amounts.

For those in the 50-to-64 age group, 30 percent reported they are withdrawing more now from their savings. That can be a bad omen for retirees who may have decades of life left to fund.

It surprised Mary Ellen McCarthy, registered investment adviser and founder of Responsible Investing in Brookline, Mass.

"If the withdrawals are from cash savings, that's fine and is certainly better than increasing borrowing. But it can be very, very damaging to long-term financial safety to increase withdrawals from stock portfolios that have already been hurt by the (recent) crash," she says.

"Stock portfolios hit simultaneously with both a market crash and increased withdrawals will probably never come close to recovering. Smart retirees, or those getting close to retirement, should carry a significant cash cushion so that they can avoid being forced to liquidate stocks or bonds at just the wrong moment," she says.

For nonretired workers, the financial crisis knocked a bit of wind out of their retirement sails. Only 31 percent of workers plan to retire on their original schedule.

How has the financial crisis affected your retirement plans? Do you expect to retire:
A third say that their retirement date will likely be knocked back between one and 10 years. Seven percent say they've been thrown off track by 10 years or more.

And 18 percent believe they will never be able to retire -- nearly exactly what the poll found two years ago in the April 2007 retirement attitudes poll.

Effect on investing strategies

Though their retirement plans may have changed due to stock market volatility, investing strategies have mostly stayed the same for most people.

A majority, or 53 percent, of those surveyed say that they have kept their investments about the same despite the market turbulence. Only 5 percent say they sold all or most of their equity positions or equity mutual funds.

Few people had the mettle to get aggressive during the market free fall. Just 3 percent say they bought more stock or stock mutual funds. But 9 percent put more money in conservative fixed-income products such as bonds, CDs or Treasuries.

"For the people who say they haven't changed their investing strategy, I would say 'kudos,'" says LaSpisa.

"But, part of the reason is that they don't pay much attention to it. If only I had a nickel for every client who walks into my office and says, 'I stopped opening my statements because I don't want to see them,'" he says.

Investing can be an overwhelming process for the average investor and most people are on their own for their retirement planning.

Only 27 percent of nonretirees surveyed work with a financial adviser and depend on them to make their financial decisions.

"Let's hope they know how to monitor that adviser and communicate effectively with him or her -- and that the Bernie Madoffs of the world are the exception," McCarthy says.

Start saving now

In 2008, only the most conservative investors managed to avoid the carnage of the market crash: conservative investors and people who squirrel away their savings under the mattress.

In general, there's no escaping market volatility for most people hoping to fund a couple of decades of retirement, but consistently saving will get most investors there.

One thing is certain: Only a few retirees wish they had spent more money during their working years rather than save for retirement.

Just 12 percent of retirees said they regret not spending more money when they were younger. But 83 percent have no such regrets.

Results are based on telephone interviews with a nationally representative sample of 1,003 adults, age 18 and over. The interviews were conducted from Sept. 17 through Sept. 20, 2009, under the direction of Princeton Survey Research Associates International. Interviews were conducted on both landline and cell phones using random digit dial (RDD) sample. Sample demographics were weighted to match population parameters derived from the Census Bureaus' 2007 Annual Social and Economic Supplement data. The overall margin of sampling error is plus or minus 4 percentage points for results based on the total sample. Results based on 328 retirees have a margin of error of plus or minus 6; results based on 639 nonretirees have a margin of error of plus or minus 5. Results based on smaller subgroups are subject to larger margins of sampling error. In addition to sampling error, the practical difficulties of conducting surveys can also introduce error or bias to poll results. For full results and methodology, download this PDF.

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