Why uncertainty still rules retirement planning

A new survey of retirement preparedness paints a grim picture of the financial future awaiting older Americans. Fortunately, there are steps you can take if you want to be more financially secure in retirement than many of your peers.

Consumers' Research, an independent educational organization, surveyed 1,200 American adults and found that even as people approach retirement, they often have no idea how they are going to afford it. The high level of uncertainty should be a wake-up call for anyone who does not want to settle for such a troubled version of their golden years.

A grim picture

Consumers' Research found that 46 percent of people age 60 to 69 feel they are not on track to having enough money to retire. The retirement picture gets only a little clearer as people get even closer to the end of their careers: Twenty-six percent of people over 70 said they were not on track toward being able to afford retirement, and another 22 percent of this age group were unsure.

Difficulty affording retirement does not seem to come as a shock to older Americans. If the responses of younger Americans are any indication, people can see that difficulty coming from a long way off. Only 28 percent of people in their 40s feel they will have enough money to retire, according to the study.

A big reason why people are failing to save for the future seems to be that their incomes won't even cover the present. The study indicates that 57 percent of people in their 50s do not feel their incomes are adequate to meet their expenses. In other words, at an age when people should be in their peak earnings and savings years, they are still having trouble making ends meet.

Improving your outlook

The Consumers' Research survey indicates that way too small a portion of the working population is confident in being able to afford retirement. Here are some ways you can join the ranks of the confident:
  1. Take control with active planning. The high level of uncertainty reflected in the survey indicates that too many people have kept themselves in the dark by failing to do any financial planning. If you are unsure about your financial security in retirement, you are not going to get any more sure by ignoring the problem.
  2. Practice two-sided planning. People often talk about retirement planning in terms of income replacement, but a better starting point is figuring out what expenses you will need to cover. Planning for both expenses and income is the only way you can know whether you will be able to afford retirement.
  3. Cut expenses now. This can have the dual benefit of both boosting savings now and setting the stage for an easier-to-afford lifestyle in retirement.
  4. Take a total-return approach. With bank rates near zero, trying to fund retirement entirely out of income is virtually impossible for most people. Use a planning approach that assumes you will draw from the total return of your investments.
  5. Make your investments count. From comparing savings account rates to keeping a sharp eye on investment fees, there are things you can do to get more bang for your investment buck.

There is no doubt about it: Saving for retirement is tough. However, running out of money in retirement is even tougher.