Hope for Retirement

Several months ago I got a panicked phone call from a TV news reporter. Fidelity had just released a report showing that people should expect to save eight times their final salary in order to enjoy a comfortable retirement. The reporter wanted me to reassure viewers that their savings needs weren’t really so extreme. Imagine what she would have thought if she had seen the estimate from another source that sets a benchmark of 11 times final salary.

In What's Your Retirement Number?, senior editor Jane Bennett Clark sorts out the numbers and offers some soothing advice: Don’t freak out. “The precise number isn’t as important as the overall message,” says Jane, which is to get cracking and save, however old you are.

It’s tough to find reassuring numbers when it comes to retirement savings. In its most recent survey on retirement confidence, the Employee Benefit Research Institute found that 28% of workers surveyed were not at all confident about having enough money to retire comfortably, and 21% were uncertain. But in the glass-is-half-full category, 51% said they were “very” or “somewhat” confident.

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And there are other occasional bright spots. When EBRI took a detailed look at members of Generation X households (those born between 1965 and 1978) to see whether they were at risk of running short of money, it found that nearly half (49%) will have substantially more than adequate income to afford basic retirement expenses and uninsured health care costs (at least 120% of EBRI’s estimate of what they need). Another third will have income that’s close to adequate (80% to 120% of what they need). About 20% will have income that is substantially below the threshold (less than 80% of what they need).

“One problem with simply classifying a household as ‘at risk’ is that some households may be missing the threshold by relatively small amounts,” says EBRI research director Jack VanDerhei. A determining factor is an individual’s future years of eligibility in a 401(k) or similar retirement plan; the more years you have to contribute, the more secure your prospects.

Another glimmer, says EBRI, is that workers who have taken the trouble to calculate how much money they’ll need in retirement tend to have higher savings goals and more confidence that they’ll achieve them. In fact, those who used an online calculator significantly decreased their chances of running short of money.

Kiplinger’s can help, with our retirement calculator. Or use the worksheet in the just-published edition of Retirement Planning 2013, our annual guide, available on newsstands or at http://store.kiplinger.com. The magic number there is a reasonable $5.95.

Helping hands. Regardless of whether people meet their savings targets, I don’t foresee a world in which retirees are camped out en masse on the sidewalk. For one thing, people are already coming up with innovative ideas for senior housing. And if seniors are really in a pinch, I’m confident their families will come through. A survey by PulteGroup, the homebuilder, found that almost a third of homeowners expect their grown children or aging parents to move in eventually. In recent years, adult children have been heading back home because of the bum economy. And a poll by Pew Research Center found that 78% of those kids are satisfied with their living arrangements. I trust they’ll remember that if and when it’s their turn to step up to the plate.