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Retirement savings require planning

The annual Retirement Confidence Survey, cosponsored by the Employee Benefit Research Institute, a private, nonprofit, nonpartisan public policy research organization, and Mathew Greenwald & Associates, a Washington, D.C.-based market research firm, measures expectations and attitudes about retirement among both current workers and retirees.

Here are some of the more notable results from the most recent survey:

• Many current workers have accumulated only modest retirement savings and may be underestimating the share of their pre-retirement income that they are likely to need in retirement.

• Only 24 percent of workers are very confident about having enough money to live comfortably in retirement, a figure that has remained relatively steady since 1998, and 68 percent express some level of confidence in their ability to live comfortably during their golden years.

• Key indicators of retirement planning also are holding steady according to the survey. The proportion of workers saving for retirement remains in the 70th percentile, but only 42 percent report that they actually have attempted to calculate their savings needs.

• Many workers are counting on employer-provided retirement benefits that are becoming increasingly unavailable. Only 40 percent of workers indicate that they or their spouse currently have a defined benefit (pension) plan, but 61 percent expect to receive income from such a plan in retirement.

• Suppositions about financial needs for retirement often are based on what appear to be unrealistically low income-replacement ratios. Although 59 percent of workers say that they prefer a standard of living in retirement that is the same or better than in their working years, one-half of them think that they can maintain a comfortable retirement on 70 percent or less of their pre-retirement income.

Dallas Salisbury, president and CEO of EBRI, has offered a list of tips that anyone who is serious about retirement planning should follow. Some of his suggestions include:

• Review your Social Security benefit statement every year. Social Security benefits may make up a relatively small part of your retirement income, but it’s still important to know at what age you will be eligible for full benefits and the amount of benefits that you are projected to receive, part of which will depend upon the age that you elect to begin to receive benefits.

• Prepare an estimated budget. Although it may require some assumptions, if not outright guesswork, try to determine the annual retirement income that you expect to receive and the expenses that you are likely to incur to offset that income.

• Estimate your longevity. With longer life spans, today’s retirees are apt to need a much larger capital base to get them all the way through their retirement years. Your projected life expectancy, your health and your family history are the main factors to consider. You can find tools to help in making your estimate at

• Determine how much you will need to save for retirement. According to the survey, only 42 percent of workers have done any calculations to determine how much that they will need to accumulate in order to have sufficient funds for retirement. Yet knowing how much is needed to fund a comfortable retirement is a key element in planning.

• Make health care a part of the equation. A total of 58 percent of current workers report that they and their spouses do not expect to receive any health insurance from their employers when they retire. Recent EBRI research showed that individuals age 55 who live to age 90, would need to have accumulated $210,000 by age 65. That amount would pay for insurance to supplement Medicare and out-of-pocket medical expenses in retirement.

Not surprisingly, older workers are more likely to have the retirement assets to pay those costs: 25 percent of workers age 55 and older say that they have accumulated more than $250,000 in retirement savings.

Salisbury points out that approximately 40 percent of those who retire early do so for health reasons.

Retirement planning requires focus and time commitment but does not have to be a worrisome process. Consulting with a Certified Financial Planner will help you develop an effective strategy.

Jeff Francis is senior vice president and senior investment officer for First Tennessee Brokerage. For more information about this or other personal finance issues, call 865-971-2321 or visit your local First Tennessee financial center.


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