A convergence of pressures on ordinary Americans is forcing them to become more active on funding retirement, two financial companies' studies have reported.
Wachovia Corp. found in its survey that concern over Social Security's viability is spurring Americans to do additional planning, saving, and investing for retirement. "We are enthusiastic that consumers appear to be taking more responsibility for their retirement well-being," said Mark Folk, a spokesman for the Charlotte banking company.
Wachovia's February study found that more than 80% of consumers feel Social Security will be important to their retirement well-being but that nearly half lack confidence the benefit will ultimately be available to them.
Fidelity Investments, meanwhile, has a more recent study that says despite rising interest rates and fuel costs, and because of their uncertainty about pension benefits, working families have persevered in their saving for retirement.
That's the good news. The bad news is that they are still saving too little, according to Fidelity. Retirees are saving enough to replace just 57% of their income, and that's far too little, said Robert Reynolds, a vice chairman and the fund giant's chief operating officer. It is little better than the 56% rate that Fidelity found last fall.
"Fidelity believes 85% of income replacement is a reasonable starting point when planning for retirement," Mr. Reynolds said.
There are signs that Americans want to deal with the issue: 52% of the 2,000 households surveyed said they had acted in the past half-year to become better prepared for retirement, according to Fidelity. These actions included boosting contributions to 401(k) and other retirement accounts, reallocating investment portfolios, and seeking professional guidance.
The Wachovia survey reported a similar finding - that consumers feel most prepared for and confident about retirement when they work with an adviser, according to the banking company's Mr. Folk.
It also said that 51% of respondents reported making changes in their retirement preparations, including boosting their 401(k) and IRA retirement savings, planning more carefully, and looking to alternative investments such as real estate.
A major concern among households is their fear of making a mistake with their retirement savings, and that number has "not been moving a whole lot," Mr. Folk said.
About 83% of respondents said they know they are saving too little, Fidelity said, a five-percentage-point increase from the fund company's June 2005 study.
Fidelity's index gauges Americans' retirement readiness by studying households' overall financial situations, including factors such as workplace and personal savings, projected Social Security and pension benefits, expected retirement horizon, and longevity.
Mr. Reynolds called on the federal government to clear the way for "structural change" in workplace savings plans. Specifically, Congress should pass pending legislation to indemnify employers who adopt automatic enrollment in defined contribution plans, he said. Under such an arrangement, employees who did not wish to participate would have to take the initiative to opt out. Employers have been slow to adopt the model because of legal concerns, Mr. Reynolds said.
Fuel costs are challenging Americans' savings efforts, Fidelity's survey said. About 76% of respondents said rising fuel costs had affected their ability to save, and nearly half of this group said their savings rate fell as a result. About one-quarter cited fuel costs as having delayed a plan to start saving.
Though workers recognize that health care will be a major retirement expense, they tend to underestimate its cost. Fidelity pegs the minimum necessary at $200,000, but survey respondents said a 65-year-old retiree couple would need just $80,000.
For many, semiretirement might be a better term, according to the Fidelity survey. Nearly half of respondents reported that they plan to work at least part-time in retirement to help pay for health care, and one-third planned to delay retirement to hang on to their health insurance longer.
Underlying Americans' thinking regarding retirement is a reevaluation of how much income they can rely on. Fidelity's survey found that 49% of households expect to receive a pension, a two-percentage-point drop from last fall.
Most respondents - 52% - said they intend to rely most heavily on a combination of personal savings, income from working in retirement, and real estate assets; 22% said Social Security; and 17% said a pension.
