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Retirement wake-up call

Survey finds that Americans are having doubts about how to pay for their golden years.

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By Ben Rooney, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Americans are becoming increasingly worried about saving for their retirement as the nation's economic outlook continues to darken, according to a new survey of workers and retirees released Wednesday.

Only 18% of workers polled were very confident about saving enough money for a comfortable retirement, according to the Employee Benefit Research Institute's 2008 Retirement Confidence Survey. That's the steepest annual decline in the survey's 18-year history, and down sharply from 27% in the previous year.

While confidence levels among all respondents declined, the survey found younger (ages 25-34) and lower income (under $35,000 annually) workers were the most dispirited about their ability to save for a comfortable retirement.

There are many factors that contribute to savings planning but "the economy and health costs are major concerns," said Dallas Salisbury, president of the EBRI, in a statement.

Health care woes. More than half of workers who retired earlier than planned, did so because of health problems or disability, according to the survey.

At the same time, nearly half of the retirees polled said their health care costs were higher than they expected and more than half say they are more worried about their financial future now than they were right after entering retirement.

Retirees aren't the only ones worried about health care costs. The survey showed that only 34% of workers expect to collect employer-paid health insurance after they stop working, down from 42% last year, as more employers eliminate health care for future retirees.

A rising awareness about the diminishing availability of employer-paid health care coverage in retirement may actually turn out to be a blessing in disguise, according to Salisbury.

"If there is a silver lining, it's that Americans finally may be waking up to the realities of being able to afford retirement," he said. And that reality may lead to more prudent savings plans.

Modest savings. Overall, the amount of money that workers are socking away for retirement is modest at best, according to the EBRI.

Nearly half of all workers have less than $25,000 set aside. And a full 22% of workers and 28% of retirees say they have no savings of any kind.

As a general rule, retirement savings - including social security benefits and pension - should be large enough to provide about 80% of pre-retirement income.

Unrealistic expectations. Workers may also be basing their retirement plans on "unrealistically low" estimates about how much they will spend after leaving the work force, according to the EBRI.

The survey found that 58% of workers think they will spend less money in retirement than they do while working.

However, only 46% of retirees said that was the case and 54% said they were more concerned about money now than they were at the beginning of their retirement.

Do the math. Completing a retirement savings calculation is one of the best ways to encourage good saving habits.

After calculating a goal amount for retirement, 44% of respondents said they modified their savings plans, with 59% increasing the amount they put away.

Other respondents changed their investment mix, reduced debt or spending, or enrolled in a retirement savings plan at work.  To top of page

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