The Far Horizon

Financial-services firms love to do surveys on Americans' knowledge of their retirement-savings needs, and each confirms what we all know: We don't save nearly enough.

Their surveys, of course, are self-serving. Like the scare campaigns they wage about college savings (See related column), the aim is to remind us all how much we need to avail ourselves of their services.

A new survey by the American Savings Education Council and MetLife, however, contains a startling revelation that bears closer scrutiny -- especially because of the age group it covers.

The survey polled 1,201 men and women ages 56 to 65 who said they were within five years of retirement. The key question: If you reach age 65, what are the chances you'll live to 85?

Barely one in three realized the odds are 50-50 today that you'll live another 20 years if you reach your 65th birthday. Only 23 percent correctly identified longevity risk -- the likelihood you'll outlive your savings -- as the biggest financial risk that retirees face.

We've all been conditioned to try to save enough to sustain the lifestyle to which we're accustomed. This survey shows we desperately need to be thinking about socking away enough to sustain us, period.

The Grim Reaper Kept At Bay

People in their 20s and 30s often aren't diligent retirement savers because they cling to the sense of immortality of their youth. Those of us in our 40s and early 50s rush to play catch-up when our age begins to weigh on us with the need for reading glasses and extended doses of painkillers for minor strains we once just walked off.

By our late 50s, we come to accept the fact we're closer to the end of our lives than the beginning, even though that end is much further down the road than most realize.

Continued medical advances will surely propel life expectancy even higher, meaning that someone in their 20s or 30s today may have a 50-50 chance of living to 95 or more come the day they reach 65.

This isn't meant to feed fear and play into the financial-services firms' self-promotion. Rather, the vast majority of us need to cut back on immediate gratification and consider treating the old people we will become with greater respect by getting more serious about saving for retirement.

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Consider some of the survey's other findings:

• Only 16 percent correctly answered that one or both members of a couple aged 65 have a 25 percent chance of living to 97. Eight in 10 believed there was only a 10 percent chance or no chance of such longevity.
• Extreme old age: Forty-four percent estimated that there are 27,000 centenarians in the U.S., i.e. people 100 years of age or older, when the figure is now at 82,000. The 100+ population is expected to soar in coming decades, to the point where extreme old age will be 120 or older. Size of retirement drawdowns: A third of all respondents believed they can withdraw 7 percent of their savings annually and sustain their principle, when financial experts suggest planning on safely drawing only about 4 percent.
• More than half believed they would need only 20 to 50 percent of their annual pre-retirement income to retire comfortably. Experts say the figure is closer to 70 to 80 percent, and perhaps as high as 100 percent given how much inflation may eat away at that amount over 20 years or more. Those surveyed included a significant percentage of educated and affluent pre-retirees. Nearly a third were executives, managers or professional employees, a quarter earned $90,000 or more in household income and 20 percent held graduate degrees.

The issue, ultimately, isn't saving enough to spare yourself hardship, but sparing your children and other family members the hardship of footing the cost for your daily needs and medical and nursing care when your money dries up.

The bottom line: We should no longer be concerned about how much we'll leave our heirs. We should avoid personally handicapping our progeny whom we're already collectively saddling with mounting national debt and a shaky Social Security system.

It's time to get serious about retirement savings, folks.

In other words, kick yourself in the butt now rather than steaming over how much you wish you had at this stage in your life when your assets are exhausted and you're being transferred to a fleabag nursing home -- if you're lucky.