Retirement Is a Fantasy for Many
NEW YORK ( MainStreet) While one-third of the middle class say Social Security will be their primary source of income in retirement, in future years that number may increase significantly.
"If Congress reduces the benefits of offering and contributing to retirement savings, fewer people will save," said Brian Graff, CEO and Executive Director of the American Society of Pension Professionals & Actuaries (ASPPA). "The result is more of tomorrow's retirees will need to turn to the government for help and that will mean more federal spending."
Between 2000 and 2009, employers contributed almost $3.5 trillion to public and private retirement plans, according to the Coalition to Protect Retirement. However, changes to current incentives could adversely affect employer-sponsored plans, contributions and the retirement security of millions of Americans.
"Raising new revenue should not come at the expense of retirement savings not now or in the future," said Graff.
A study by the Coalition to Protect Retirement shows widespread support for maintaining the current tax treatment of retirement savings vehicles, such as 401(k) plans, 403(b) plans and traditional IRAs. About 87% of all Americans and 95% of those who have a tax-deferred 401(k)-like retirement plan account believe retirement savings should be off limits to Congress and not a source of new revenue for the government.
"Given the vast numbers of baby boomers who reach retirement age every day, retirement savings incentives are needed more than ever," said Kenneth E. Bentsen, president of the Securities Industry and Financial Markets Association (SIFMA).
In fact, retirement is a fantasy for many.
A Wells Fargo study found that 37% of middle class Americans say they'll never retire and will work until they are too sick or die with only 13% calling it a priority to save for retirement.
"The middle class just isn't making the link between being invested and the potential growth of their savings but on top of this fear is apathy. There is no interest in learning more about investing," said Laurie Nordquist, head of Wells Fargo Institutional Retirement and Trust.
Consumers also have unrealistic expectations about when they will retire, how much money they will need in retirement and where that income will come from, according to a another survey.
"Unpredictable retirement dates compounded by misperceptions about retirement expenses and the uncertain futures of traditional sources of retirement income may leave many retirees at risk for outliving their retirement savings if they don't prepare properly," said Eric Taylor, vice president with Genworth.
The Future of Retirement Income study by Genworth discovered that 46% retired sooner than planned with 25% saying they just didn't want to work anymore, 36% citing job loss and 17% saying they retired early because of health issues.
Expectations about retirement expenses also don't match reality. About 52% of pre-retirees expected expenses to decrease in retirement when in fact 77% found that their general living expenses increased in retirement.