Why the 99% May Never Retire

Occupy Washington, DC. the 99%Economists say that we're in a recovery, but try telling that to ordinary middle-class Americans. As hard as it is to make ends meet right now, Americans are extremely pessimistic about ever getting to retire with any kind of financial security.

A recent survey from Wells Fargo (WFC) highlighted the current plight of the 99%. Among 1,000 people who responded to the survey, more than half were most concerned day-to-day simply with finding money to pay their monthly bills. Understandably, that has pushed less pressing needs like saving for retirement onto the back burner -- only a sixth of respondents said it was a key concern for them right now.

But while they may not be in a position to make retirement saving a priority, middle-class Americans are still worried about it.

Three in 10 believe they'll have to work to age 80 or beyond in order to have a comfortable retirement, though most of them admit their job prospects at such advanced ages are poor. More than two-thirds believe they'll work part-time during their retirement years, and a substantial fraction of them predict it won't be because they want to, but because they'll need to in order to make ends meet.

Dangerous Misperceptions

Perhaps most troubling about the survey, though, were the disparities between the amounts that most people think they ought to save versus what they're likely to need.

For instance, the survey found that most people believe they'll only need about $47,000 to cover their overall out-of-pocket health-care costs in retirement. Yet estimates from multiple sources, including Fidelity and the Center for Retirement Research, put the true number closer to a $250,000 -- more than five times what people expect.

In addition, people may be overly optimistic about their ability to live on limited income. A third of those surveyed said that they think a sufficient retirement income would be half or less of their current income. Although retiring does reduce some of your costs, other expenses tend to go up. As a result, most financial planners suggest planning to replace closer to 80%-85% of your pre-retirement income in order to retire comfortably.

Post Economic-Crash Stress Disorder

The other big problem facing middle-class Americans is a lack of attractive options for growing their money.

Even four full years after the financial crisis struck, and with the stock market nearing pre-recession highs, fully 70% of those surveyed believe that the stock market isn't an ideal place to invest for retirement.

Even more troubling is the tendency of younger investors to steer clear of the market. When asked how they would invest $5,000, only 18% of those aged 25 to 29 would put it in stocks, compared to 37% of those in their 30s and 24% overall.

By contrast, 40% of middle-class Americans would put a retirement savings windfall in a CD or savings account, though those pay only minimal interest that isn't nearly enough to keep up with inflation and taxes -- making them, essentially, safe ways to lose money slowly.

Do Not Go Blindly Into the Future

What these numbers should tell you is something that the survey's results emphasize: Large numbers of people don't know how to plan for retirement and need as much guidance as they can get.

Three-quarters of those surveyed likened their thoughts about how much money they should save for retirement as "some sort of guess;" only a small fraction based their long-term investing strategy on reasoned calculations.

Although the bulk of Americans think that employer-sponsored 401(k) plans are the best available way to save for retirement, the vast majority believe that employers should provide personalized advice to help them figure out which investments are best for them.

There's one area where the 99% aren't under any illusions: Despite expecting contributions from Social Security and, in some cases, employer pensions, it's clearer than ever to most of us that if we want to retire comfortably, it's up to us to figure out how to make it happen.

For The Motley Fool's free report on how to boost your Social Security payouts by as much as 76%, click here. Motley Fool contributor Dan Caplinger owns warrants on Wells Fargo. The Motley Fool owns shares of Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo.

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The figure of 80% of your income needed for retirement is a poor number. It depends upon your income and what you owe when you retire. I live on about 1/3 of what I made pre-retirement and live very comfortably. I owed nothing when I retired and keep it that way. So one has to be realistic not just listen to planners average figures. If you make $40K while working, you might need that or slightly more in retirement. But if you make $150k, you do not need $120k to live comfortably if you go into retirement debt free.

December 15 2013 at 4:54 PM Report abuse rate up rate down Reply

I recall a cartoon I saw in the early 70s, where a young guy just out of college on a job interview asked about retirement benefits. That was suppose to be funny. Mybe the joke was on us for not serioulsy thinking about this early enough.

December 03 2012 at 5:39 PM Report abuse rate up rate down Reply

"making them, essentially, safe ways to lose money slowly." Given the success of my retirement investments losing my money slowly over the years seems much more appealing than losing it all at once. If investing was easy everyone would be rich and not have to worry whether they could retire or not.

November 05 2012 at 10:12 AM Report abuse rate up rate down Reply

The "Middle Class" had 40+ years to prepare for retirement. Amazing how I remember in the late 70's people people entering the work field were advised to start preparing .. the day will come. I hope it is not a surprise .. it is here! Many dont want to put the effort in .. knowing their is generally some form of govt help (food stamps. welfare, unemployment etc etc). People generally lack the personal pride to do it for themselves and not take assistance. Most are more than willing to help those in need .... problem is .... too many look at "need" as an opportnity to getr more ..... and the line is getting longer and longer
I dont see the current election as democrat vs. republican .. I see it as independent vs. dependent and the current administration has done its best to create the huge dependent following it has

November 05 2012 at 8:56 AM Report abuse +1 rate up rate down Reply
1 reply to rgmac12's comment

Exactly. My father made me open an IRA, while I was still in college.

November 09 2012 at 10:12 AM Report abuse rate up rate down Reply

Hope and change and the Politicans of Both Parties, have driven the once Middle Class of this country into Poverty. You now have to work at any job for any rate of pay, until you drop dead. You'll take note that the politicans are riding high and have plenty of money. They have their benefits, and are not forced to have "Obama Care", for themselves and their famlies! The American People are forced into a sub standard health care system while the politicans get to keep the worlds best health care. With all their talk of "FAIRNESS", Where Is Their Fairness Tward The American People? History has proven over and over again that when the middle class of any country are treated poorly, it does not turn out well for those in power.

November 04 2012 at 6:41 PM Report abuse +1 rate up rate down Reply

You can't retire because somebody has to support the welfare bums and illegals.

November 03 2012 at 9:43 PM Report abuse +2 rate up rate down Reply

Extraordinary times call for extraordinary measures. Jobs are available--just not where some folks need them. If folks can relocate, this should be a consideration. Jobs are available--just not what some folks may want to do. If folks can understand that temporary setbacks don't last forever and that you sometimes have to do whatever you need to do, the bad times do pass. I know. I've scrubbed floors, cleaned toilets, worked at McDonald's, had a few factory jobs (cars and camping equipment), I never thought I'd retire comfortable at age 58, but I did 2.5 years ago. Save, save, save. Live below your means. The sacrifices made today will mean some very good times later.

November 02 2012 at 11:44 PM Report abuse rate up rate down Reply
1 reply to MONTOOTH's comment

the perfect formula .. congrats to you for your hard work and vision

November 05 2012 at 9:29 AM Report abuse rate up rate down Reply

America is addicted to cheap Chinese products that they pay for with credit cards. I wonder how many America families reply to their or their kids desires with " we don't have any extra money to spend this month, maybe next month".It's so easy to satisfy your wims buy pulling out your Visa card. My parents never had a credit card, bought only what they could pay cash for and retired with plenty of money and security. Stay out of debt, buy only what you can pay cash for. People just need to say no more often.

November 02 2012 at 12:17 AM Report abuse rate up rate down Reply
1 reply to capenv's comment

I do that all the time, and that's despite the fact that we do have the money. My parents grew up in the Depression, so I've heard since I was a little kid about what it's like not having enough money.

Of course, our son is an only child, so he argues that there is extra money, since he has no siblings to feed and clothe. Still, I'm right, but he he makes a logical argument.

November 09 2012 at 10:15 AM Report abuse rate up rate down Reply

Americans are living paycheck to paycheck because they are constantly in debt over things they don't need. Why buy a new car? Fix the old one. Why have a 6000 square foot home, when half that of that is adequate, and the kids move out anyway. How many complain they are broke, but on weekends are out partying and why? Debt truly ends when you say, enough is enough and do something about it.

November 01 2012 at 9:40 PM Report abuse +1 rate up rate down Reply

The American Middle Class, Needs To Remember That It Has Been - BOTH - Democrats & Republicans, Who Have Worked Very Hard At DESTROYING The Middle Class, While Advancing Themselves. What The People Of This Country Need Is A "Middle Class" Party To Work For Them As It Is Obvious The Other Two Parties Could Care Less About The Middle Class!!!

November 01 2012 at 6:27 PM Report abuse +1 rate up rate down Reply