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Retirement planning wishes vs. reality

This sure sounds like good news: The 2016 Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute found that nearly two-thirds of workers surveyed (63 percent) say they're very confident or somewhat confident they can afford a comfortable retirement. Unfortunately, many of these workers shouldn't be so confident, considering their lack of planning and meager retirement savings.

Less than half of those surveyed (48 percent) have tried to calculate how much money they'll need in retirement, and more than one-third (39 percent) simply guess rather than doing a systematic retirement needs analysis. This means many workers who report they're confident about their retirement are basing this confidence on guessing or simply hoping that somehow, things will work out OK. Bad move!

The RCS reports that almost half (47 percent) of workers surveyed think they'll need to save at least $500,000 for a comfortable retirement. Seventeen percent say they need between $250,000 and $499,000, and 26 percent think they'll need to save less than $250,000 for a comfortable retirement.

Let's do a reality check on these numbers: Using the 4 percent rule, $500,000 in savings generates an annual income of about $20,000 per year, and $250,000 generates about $10,000 per year. This is one piece of evidence that the guessers are guessing too low because many workers will need well above $500,000 in savings for a comfortable retirement.

What's the progress toward that goal? Only 26 percent currently have saved $100,000 or more for their retirement, so there's a long way to go to reach $500,000 or even $250,000.

When it comes to other key steps to prepare for retirement, less than half (40 percent) have estimated their Social Security benefit or spoken with a financial planner (36 percent), and only a little more than one-fourth (27 percent) have calculated how much money they'll need for medical expenses in retirement.

Many workers report they'll delay their retirement, with almost two-thirds wanting to retire at age 65 or later. This breaks down as follows: 37 percent plan to retire between ages 65 and 69, 20 percent after age 70 and 6 percent say they'll never retire. While working longer is a smart move for financial and social reasons, for many people, it's unrealistic to assume that work will be available indefinitely or that they'll be healthy enough to continue working into their 70s.

The RCS also reports that 46 percent of retirees said in 2016 they had retired earlier than planned, often for a hardship such as a health problem or disability. Two-thirds (67 percent) of current workers say they plan to work for pay in retirement, whereas only about one-fourth (27 percent) of current retirees say they've actually done so.

Regarding Social Security benefits, almost two-thirds of workers (62 percent) report that Social Security will be a major source of their retirement income (even though far fewer workers have actually learned how much these benefits will be). Yet only 39 percent are very confident or somewhat confident that Social Security will continue to provide benefits of the same value provided to current retirees.

If you're among those who aren't very confident about the dollar amount of Social Security benefits you'll be getting or whether the system will be around when you reach retirement, it would be a good idea to figure out how you can boost your retirement savings to make up for the benefits you think you'll lose.

Almost two-thirds (65 percent) of workers expect to be able to live on a retirement income that's less than half of their pre-retirement household income. And given the inadequate saving and planning the RCS found, that prediction may turn out to be true -- but many people won't be very happy about it.

What the RCS report truly shows is that many people need a retirement wake-up call. You can start with learning about your Social Security benefits and calculating how much money you'll need for a comfortable retirement. You'll most likely need to boost your savings, if that's possible. Work with a qualified and unbiased financial advisor if you need help with these steps.

Think you'll work longer to make ends meet? Merely hoping you'll be able to do that isn't enough. You'll have to take concrete steps to maintain your health and keep your skills and contacts up to date.

Ben Franklin may have said it best: Failing to plan is planning to fail. Don't fall into that trap -- do what's essential to secure retirement income that will let you live long and live well.

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