Retirement: Our perilous economic future

Americans have a retirement problem, said Melanie Hicken in CNN.com. A record percentage of workers say they’re worried they won’t be able to afford retirement. A new survey by the Employee Benefit Research Institute found that only 13 percent of workers felt “very confident” that they would ever be able to stop working—a precipitous drop since 2007—and half of respondents said they were “not too” or “not at all” confident. Sadly, their unease is fully justified. Many Americans have little or no retirement savings, and more than half of us don’t save enough, largely because we tend to carry excessive debt.

There’s good reason to “be afraid of what lurks in the retirement waters,” said Helaine Olen in Guardian.co.uk. We keep being told to “stay in the workforce longer and to save more money,” but how can we when household incomes are falling and older workers can’t find jobs? Even a booming stock market isn’t likely to help. “Only about half of us have investments in the markets, and even then, for most of us, the amounts are mere trifles.” Saving 3 percent of one’s salary in a 401(k) is definitely better than saving nothing at all, but it’s hardly enough.

This is a problem that “goes beyond saving,” said Mark Miller in Reuters.com. Instead of projecting their retirement expenses, “people are guessing, or relying on misleading rules of thumb.” Workers who want to plan for retirement should start out by adding up “actual nondiscretionary expenses” like housing, food, utilities, and transportation. “Remember that when you stop working, some expenses disappear: commuting, work wardrobes, lunches out—and saving for retirement itself.” Compare those expenses to your income, including Social Security, pensions, and savings withdrawals. If your expenses outweigh your income, start trying to save more, but also “think creatively about ways to reduce expenses.”

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There are other tricks to making sure your savings last, said Emily Brandon in USNews.com. Maximize the amount of Social Security income you’ll get by making sure you have at least 35 years of covered earnings and delaying claims until age 70. If you have a pension and are offered a lump-sum payout, manage it carefully—it won’t have the same protections as government-insured pensions, which guarantee outlays “up to certain annual limits and will pay out benefits if your former employer goes out of business.” And if possible, pay off your mortgage before retiring. Doing so “eliminates one of your biggest monthly bills” and secures you home equity that can “be tapped for extreme emergencies.”