Have Americans Given Up on Saving for Retirement?

Americans have reached a new level of futility in planning for their retirement. Many say there is no point in saving with interest rates so low and future health costs so high

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In the wake of the Great Recession, retirement-minded Americans are feeling an unprecedented amount of futility. They are undersaved and — worse — see little reason to do anything about it.

That’s the alarming conclusion in a new report from the Deloitte Center for Financial Services, which found that 60% of preretirees believe health care costs will consume their savings no matter how much they save. Similarly, 39% believe investment returns won’t be high enough to provide decent retirement income regardless of how much they manage to put away.

Deloitte found exasperation at every turn: 58% don’t have a retirement plan; nearly 40% don’t know what an annuity or mutual fund is; and 20% expect to rely purely on Social Security for their retirement needs. More than half don’t trust anyone’s advice.

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Collectively, we seem to be throwing the towel. It’s not difficult to understand why, to be sure. After a sharp pullback in 2008 and ’09, stocks are only now touching levels they first reached in the late 1990s. So the market has been dead money for nearly 15 years if you bought then and simply held on. A lot of folks who were on track with savings at, say 45, have fallen way behind and now they are 60. This helps explain why so many boomers now plan to work past their normal retirement age of 66 or 67.

Meanwhile, housing is finally making a comeback. But real estate values in most markets are nowhere near the levels seen in 2007. And historically low interest rates are behind the spreading feeling that decent retirement income is a pipe dream.

The high cost of health care, and slowly disappearing coverage for retirees, further fuel the growing sense of retirement futility. Extend Health found in a survey that adequate health insurance coverage was retirees’ top concern and that the share of those worried about “having enough money to pay out-of-pocket medical expenses” had doubled in the past five years.

One out of two workers says they will delay retirement solely to keep their health plan, reports the Employee Benefit Research Institute (EBRI); 1 in 4 says they would retire earlier than currently planned if they were guaranteed access to health insurance.

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Only 18% of workers are employed at firms that offer health coverage to early retirees, down from 29% in 1997, EBRI reports. Between 1997 and 2010, the percentage of retirees over age 65 with retiree health benefits fell to 16% from 20%.

With an economic recovery under way, and housing rebounding and stocks verging on new highs, perhaps the sense of futility will ease before we all slip into a coma. Let’s hope so, because giving up isn’t the answer.