DES MOINES, Iowa (AP) — Tom Taormina is 65 and has no retirement savings.
The Virginia City, Nev., business consultant said it’s not for lack of trying. He and his wife, Midge, have tried to save and at one time invested in the stock market, but it’s all been depleted.
“We’re scrambling to make it through the next 20 years,” he said. “We’re doing everything we can to set money aside, but every time we do something unforeseen comes up.”
They’ve downsized and cut expenses. He no longer drives a leased Lexus and now sits behind the wheel of a 2008 Subaru Forester. He also brought in an investor on to help with his business, The Taormina Group Inc., a business consulting firm.
Once a quality control engineer with Ford Aerospace at Mission Control, he’ll get a pension of $140 a month, but that’s the extent of his planned retirement income.
His retirement plan consists of selling the business in 2014 and continuing on the lecture circuit. An author of 10 books on business and process management, he hopes to continue writing for additional income.
His wife, who is 60, retired for about 12 years when his business was growing, but she’s returned to work as a teacher’s aide to help pay for health insurance, he said.
Like many workers their age, retirement isn’t an option right now.
The prolonged recession is making it harder for many workers to set aside money for retirement.
A new survey released Tuesday by the Employee Benefit Research Institute shows the percentage of workers who say they’ve saved for retirement slid to 69 percent in January, down from 75 percent in 2009.
Perhaps more alarming is the increasing number of workers who say they have little or no retirement savings.
More than a quarter of those surveyed said they have less than $1,000 set aside. That’s less than a mortgage payment for many homeowners.
The trend is largely the result of the financial markets dragging account levels down and some workers tapping into the accounts after they or their spouse lost a job, EBRI’s research director Jack VanDerhei said.
David Burrows, 38, of Dallas, said he had to cash out one of two IRAs to help pay bills after closing down his advertising agency recently and laying off eight employees.
While he’s looking for a management level job, he’s doing freelance marketing work. His wife, Margaret, is continuing to contribute to her 401(k) at work but at the minimal match level for now, he said.
Saving for retirement is important to them, but conditions right now require intense focus on keeping up with bills. “I’m trying to budget for everything else and my IRA replenishment is on the back burner right now until we can move things forward,” he said. Any extra money is going into an emergency fund instead of retirement savings.
The EBRI survey also indicates most workers have no clue about how much they need to save for retirement. Less than half of workers surveyed saying they’ve tried to calculate how much they’ll need to live comfortably.
With the growing access to financial information, including Web sites providing tools to figure it out, financial experts say it’s hard to imagine why people don’t do the math.
“I’m still disappointed, as a guy that’s been around 26 years in this industry, that more people aren’t taking the time to do the calculation to understand, ‘Do I have enough money for retirement?’” said Dan Houston, president of retirement and financial services for 401(k) provider Principal Financial Group Inc.
Principal is one of 20 companies that paid for the survey.
It might help if workers were to look at their 401(k) as an income stream they’ll tap into at retirement rather than simply a savings tool, said Paul Yakoboski, an economist and principal researcher at TIAA-CREF Institute. It’s the research arm of the retirement planning organization.
He also suggests using a calculator to determine your spending needs in retirement then working backward to figure out how much you should save to meet that need.
EBRI’s VanDerhei said although workers know they’ll simply have to work longer if they don’t put aside enough money now to live comfortably in retirement, it’s a risky proposition. That’s because workers assume they can just add years onto their working life to make up for the shortage. But in a recent EBRI study nearly half of retirees said they left the work force sooner than planned because of their health, their spouse’s health, a job loss, or the needs of an aging parent.
Still workers’ confidence in their ability to have enough money to retire comfortably has stabilized, it remains near last year’s 20-year low. Those saying they’re very confident was 16 percent, about the same number as last year, but significantly lower than the 27 percent who were confident in 2007.
Retirees have lost even more confidence over time, with 19 percent saying they expect to have enough money to live comfortably. The percentage stood at 41 in 2007, fell to 29 percent in 2008 and sunk further to 20 percent a year ago.
More than 900 workers and 250 retirees were randomly chosen for telephone interviews in January. The statistical margin of error is plus or minus 3 percent.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
I saved for my retirement, and did quite well. Between the rogue financial consultant (who worked for a major financial institution), and the crooked lawyer I hired to get my savings back (he’s in jail now). I lost everything. Add the difficulty of getting a job in these tough economic times, age discrimination, and the onset of severe arthritis of the thumbs, and I have a real mess. I can no longer afford my house, but I can’t sell it either without leaving me destitute. What’s a fellow to do?
I think it’s a joke that the fellow is ‘cutting back’ by driving a 2008 Subaru, Try a 1992 Ford. The difficulty of selling my house and getting gainful employment is directly due to shenanigans done by the financial industry. I think there’s going to be a BIG, class-action lawsuit down the road.
I agree with the comments made in the article about understanding what you need to retire comfortably, then working backwards to figure out what you need to save now to achieve your targets. But what is also important is to scale your current life style to fit a budget that includes savings for the future. “Scaling” doesn’t necessarily mean scaling back, at least not always. During our good financial years, we used the extra money to pay off our loans and mortgage. That afforded my wife a new Lexus SUV in her 30′s, but also helped us tremendously during our not so good financial years. In our 40′s, we now live in Tokyo and have no car, so we put our extra money in low-cost indexed mutual funds (which returned 30+% last year!) and 529 college savings for our kids. We’re returning to the U.S. next month, to a modest but mortgage and loan-free home, to a 401K fund that has all but recovered from the financial debacle (we didn’t touch it during the disastrous 2008 and it mostly grew back in 2009), and to a job that pays 1/2 of what I made in Tokyo, but is more than enough to live and save on. We’re not particularly financially smart people, nor very frugal, nor very lucky (I got leukemia a couple years ago and had to quit my job, but fortunately, I was covered by the Japanese health care system so the financial impact to our family was manageable), so we make up for our shortcomings by following the habits of previous generations that lived in less heady and consumptive times. We still enjoy the good times, but it’s nice that we can now enjoy life even through the not so good times. And it’s terrific that prospects for retirement continue to look great for us, thanks to the financial management and retirement savings tools that are available.
Do not trust anyone. For 38 years we have contributed to 401Ks. My husband’s present 401K is still not back up to what was lost thru the past 8 years. He puts in money each pay period and the total of the quarterly report is always less than the total of the money he puts in for that quarter. Very frustrating. Why can’t the 401K accounts have a CD tied to them? That way we would not keep seeing our money disappear. I reckon the stock market group and some congressmen made a real sweetheart deal with the 401K setups. No real savings on this so called tax break for the working, tax paying people, the profits mainly seem to be to the managers of the 401Ks!
Yep, I’m bitter and very disappointed at how 401K were to replace pensions and improve workers abilities to provide for retirement.
I’m really worried about Social Security and Medicare ever coming through with their promises of even any assistance for my 67 year old husband who is still working.