Newspaper article Sarasota Herald Tribune

On Retirement Security, Are You Sure You're Sure?

Newspaper article Sarasota Herald Tribune

On Retirement Security, Are You Sure You're Sure?

Article excerpt


You no doubt know by now that more than half of all the working-age households in America are on track to sock away too few financial resources to retire comfortably at age 65.

But do you know which category you fall into -- ant or grasshopper? A new report says you have a 43 percent chance of being wrong about that.

The Center for Retirement Research at Boston College calculates its National Retirement Risk Index by periodically looking at a Federal Reserve survey of U.S. households. The analysts wanted to know how on-target folks are about their own situation, so they compared their self-assessments to this objective risk measure.

Who got it wrong? The people who are "too worried" (24 percent of households), and those who are "not worried enough" (19 percent).

The report outlines specific circumstances that might make you see your own financial glass as full enough or too empty:

Home ownership: This was actually the biggest factor in making people underestimate their retirement readiness, since most do not consider the ability to tap their home equity for living expenses. Since the family home is worth more than all other assets combined for most two-retiree households, this will probably change in the future, with baby boomers relying on reverse mortgages as part of their income stream.

Having a 401(k): This can make future retirees less concerned than they should be, the researchers said, because setting aside part of your income and watching that total inch upward tends to create what they call a "wealth illusion." Instead of concentrating on the impressive sum you've amassed -- say, $100,000 -- it's better to think of it in terms of income, about $400 a month. Not so impressive now, huh?

Having a pension plan: The lucky few who still have this relic from the golden age of retirement -- a defined-benefit plan from a government or corporate employer that guarantees lifetime monthly income -- aren't apt to appreciate it enough, the researchers found. …

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