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Local

Ecomony contributing to scant retirement savings


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In an economy where people are worried about unemployment and making payments on everyday living expenses, saving for retirement tends to fall to the wayside.

Carl Mook, financial planner for Carl Mook Financial Group in Sycamore, said a number of factors in today’s economic climate make it difficult for people to pinch pennies with retirement in mind.

“It’s more and more of a concern,” he said. “You’re not thinking about retirement at 65 when you’re worried about employment at 35,” Mook said.

The state of the economy is hampering retirement savings the same ways Alan Peck saw about a decade ago when the economy was shakier. Some are dipping into their retirement savings to pay for everyday expenses. Others have been pushing retirement back for years because they simply don’t have enough saved.

“A lot of people feel like they’re going to have to work forever,” said Peck, financial adviser for Citizen’s First National Bank in Somonauk.

Peck said rising health care costs, a weaker stock market, low interest on cash deposits and job loss have made it more difficult for people to save. He’s noticed that recently-unemployed people are dipping into their retirement savings to pay for expenses.

Peck said one change he’s noticed in recent years is that younger people are saving for retirement more than they used to, partially because they’re uncertain about what Social Security benefits they may have in the future. He said some people who are closer to retirement age who don’t have enough saved feel as if it’s too late to start putting money away.

“People who aren’t going to be in their 60s for 10 years or so are planning to work or needing to work longer,” Peck said.

That notion is reflected in the 2011 Retirement Confidence Survey conducted in March by the Employee Benefit Research Institute. The report showed that 74 percent of people surveyed are planning to work in retirement.

Brendon Gallagher, financial adviser for Ameriprise Financial Services in DeKalb, said the old rule of thumb is that people should save about 10 percent of their income to prepare for retirement.

He said that’s not as easy to do anymore because many companies stopped offering a 401(k) match when the recession hit, money markets plunged and unemployment surged. Home prices fell dramatically, leaving many would-be retirees with much less home equity than they thought they had a few years ago, he said.

Gallagher said the retirement age in general has been on the rise, which means people have to save more money to support a longer life after retirement.

“People are eating healthier,” he said. “They’re living longer and working longer.”

The survey conducted by the Employee Benefit Research Institute shows that only 13 percent of workers feel they’ll have enough money to live comfortably in retirement, which is down from 22 percent a decade ago. People between the ages of 35 and 44 have the lowest confidence among all age groups, as 10 percent of those surveyed feel they’ll live a comfortable lifestyle in retirement.

More than half of those surveyed said they’d never calculated how much they’d need to live off when they do retire.

Mook said while many people aren’t saving up for retirement with a certain lifestyle in mind, a lot of people are pleasantly surprised with how much they have when they actually sit down to crunch the numbers.

“Most people don’t have a clue what they have” saved up, he said. “Unless you want to live like a rock star, you’re going to be fine if you’re living the lifestyle you are now.”

Top reasons people have postponed retirement in the last year:

• 36 percent cited the poor economy

• 16 percent cited lack of faith in Social Security or government support

• 15 percent cited a change in employment

• 13 percent cited not being able to afford to retire

• 10 percent cited the cost of living in retirement being higher than expected

Source: Employee Benefit Research Institute (2011 Retirement Confidence Survey)

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