A new study of retirement readiness released today likens Americans' confidence in being able to fund a comfortable retirement to a piece of Swiss cheese: Many workers' retirement plans are simply "full of holes," the report concludes.
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The survey, conducted by the Employee Benefit Research Institute in Washington, D.C., found that more than two thirds of Americans say they are either "very confident" or "somewhat confident" of their ability to save enough money to live comfortably in retirement. And a majority of those workers say they will probably need to save $250,000 or more to fund their golden years.
Yet according to EBRI, the great majority of American households—68 percent to be exact—have saved less than $50,000 in their retirement funds.
Even among those Americans who say they are "very confident" of meeting their retirement needs, 22 percent aren't currently setting aside anything for retirement. And 39 percent of them have less than $50,000 in total savings.
"We find there are a lot of people who need to be saving more than they are, if they hope to be able to afford a comfortable retirement," says Jack VanDerhei, an EBRI fellow who coauthored the study.
Beyond savings, workers don't seem to even be aware of how they will derive income once they hit retirement. For example, 61 percent of workers surveyed said they expect to receive income from a traditional guaranteed pension at retirement. Yet only 40 of workers surveyed (or their spouses) currently work for a company that offers a traditional pension.
Perhaps the biggest mistake many workers are making, aside from failing to sit down and calculate exactly how much they'll need in their golden years, is neglecting to factor in rising healthcare costs.
As more and more corporations cap retiree medical benefits, workers increasingly have to cover mounting healthcare bills on their own. EBRI research shows that workers who are 55 and who live to 90 would need to sock away an additional $210,000—over and above what's in their nest eggs—just to pay for medical expenses that aren't covered by Medicare.
