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Tough Retirement Ahead for Americans Relying on
Social Security, Pensions
Almost half expect
to fund retirement with S.S. and pensions but for only 10-20 years
April 4, 2006 - Many Americans are headed for tough
retirement years and may not be able to maintain their current standard
of living, suggests a new poll conducted by Harris Interactive for the
American Institute of Certified Public Accountants. The CPAs are also
offering free online tools to help with retirement planning.
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"A distressing gap exists between the public's
expectations for retirement and the reality," said Carl George, CPA,
Chair of the AICPA's National CPA Financial Literacy Commission and CEO
of Clifton Gunderson LLP.
"Moreover, too many Americans think they can rely
on the Social Security and pension safety net to carry them through," he
said.
"The fact is, Americans must realize they have to
take responsibility today for planning and saving for their retirement.
Otherwise, they may find themselves working far longer than they
anticipated or at a lower standard of living."
According to the poll, almost half of Americans --
46 percent -- expect to fund their retirement through Social Security
and pensions, and an equal number expect that their retirement funds
will last them 10 to 20 years.
Nearly one in four Americans, or 23 percent, has
not yet begun to save for retirement. Although almost half of Americans
-- 47 percent -- indicate they have started saving, they also admit they
have a long way to go. Forty-three percent of individuals under the age
of 35 are less likely to have begun saving.
"This is where the gap between perception and
reality is most alarming for consumers," said George. "If you plan for
only 10 years, it's likely you will outlive your savings. The fact is,
Americans are living longer, and they should actually plan for 20 to 30
years, not 10 to 20."
Americans are also underestimating how much they
will need to fund their retirement years. More than a third of survey
respondents, 39 percent, believe as little as $500,000 will be
sufficient to see them through their retirement.
But George noted that when spread out over the
course of 30 years, that amount becomes $16,000 a year and would have to
take into account uninsured medical costs and other expenses, such as
the possibility of assisted living.
Basic Steps Americans Can Take Now to Get on Track
to a Comfortable Retirement
The AICPA's 360 Degrees of Financial Literacy
program has set up a consumer Web site,
360financialliteracy.org, with hundreds of free tools and resources
to help educate consumers about personal finance matters, including
retirement. The basic retirement planning steps recommended on the site
include the following:
1. Set goals and establish priorities. Consumers
may not be able to achieve every financial goal they may have, so it is
critical that they decide which are most important and why they matter.
The most important ally in reaching goals is time. Money deposited in
savings accounts will grow and compound. The more time consumers have
the more chances for success.
2. Build a Nest Egg -- Start Saving. When
consumers calculate how much money they will need, their next goal is to
save that amount. Map out a savings plan that works. Assume a
conservative rate of return and determine approximately how much must be
saved every year between now and retirement to reach the goal. It is
never too early to get started.
3. Understand Investment Options -- Use the Right
Savings Tools. Consumers need to understand the types of investments
that are available and decide which are right for them. If they do not
have the time, energy or inclination to do it themselves, they should
think about hiring a professional financial planner or advisor. A
qualified financial planner will explain the options that are
appropriate for their goals, risk tolerance and time horizon.
Harris Interactive surveyed 1,000 U.S. adults
during March 2006 under the aegis of the AICPA 360 Degrees of Financial
Literacy campaign.
The American Institute of Certified Public
Accountants (http://www.aicpa.org/)
is the national, professional association of CPAs, with approximately
330,000 members, including CPAs in business and industry, public
practice, government, and education; student affiliates; and
international associates. It sets ethical standards for the profession
and U.S. auditing standards for audits of private companies; federal,
state and local governments; and non-profit organizations. It also
develops and grades the Uniform CPA Examination.
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