Many workers report they have virtually no savings and investments. In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.

Although 56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 33 percent report that they and/or their spouse currently have such a benefit with a current or previous employer.

That second one is kind of a shocker, that is, unless those 23 percent of respondents who said there were going to receive a pension but didn’t have a pension retirement plan thought they were being asked about social security.

And this chart says a lot about how the fortunes of aspiring retirees are changing:

That area circled in red has gone from around 50 percent to 60 percent over the last ten years and will likely continue to go higher in the years ahead as long as Ben Bernanke is running the Federal Reserve and savers continue to be punished.

A surprising 74 percent of those polled think that, if you’ve reached the one million dollar mark you are “rich” and, even more surprisingly, this hasn’t changed in seven years since the last time this survey was conducted.

It strikes me that, either one of these polls was somehow flawed or people really don’t understand what has been happening to their money – even using the government’s dubious inflation statistics, $1 million in 2003 is now worth almost $1.25 million today, meaning that there should have been a sizeable shift upward in the survey results.

The concept of a “retirement age” is going the way of the typewriter, another 20th-century relic that has been made irrelevant by changing circumstances. Middle class Americans now expect to work until they have saved enough to afford to retire, according to results from the seventh annual Retirement Survey from Wells Fargo & Company.

Three fourths (76%) of the 1,500 middle class Americans surveyed by telephone by Harris Interactive in August and September 2011 say it is more important to have a specific amount saved before retirement, regardless of age, while only 20% say it is more important to retire at a specific age, regardless of savings.

The survey also found:

• A quarter (25%) of middle class Americans say they will “need to work until at least age 80” to live comfortably in retirement
• Three-fourths (74%) of middle class Americans expect to work in their retirement years, including 39% of all respondents who will need to work to make ends meet or maintain their lifestyles, while 35% say they will work because they want to, rather than out of financial need.
• Among middle class Americans age 40 to 59, 54% say they will “need to work,” compared to 34% of those age 25 to 39. Accordingly, only 25% of those between the ages of 40 and 59 say they will work in retirement because they “want to,” versus 45% of Americans between the ages of 25 and 39.

There’s lots more thoroughly depressing data in this survey, not the least of which is that almost 40 percent of respondents have “no fears” about retirement because “it will work itself out”. For about 90 percent of this group, it probably won’t.

Also, Americans have saved only $25,000 of an estimated $350,000 they’ll need to retire comfortably with almost a third of those in their 60s having saved less than $25,000.

From the Signe Wilkinson archive at the Philadelphia Inquirer.

Reuters provides details on the perils of fund manager “de-risking” in this report and the dismal options for Rhode Island retirees are laid out in this Washington Post story.

State Treasurer Gina M. Raimondo (D) said that per capita, Rhode Island has the nation’s largest unfunded pension liability. But if the Ocean State’s pension problem is among the country’s most severe, so are the remedies being considered to solve it.

An ongoing pension reform effort is likely to result in reduced benefits for 51,000 public workers and retirees. Officials are pondering lowering retirement payments, replacing part of the guaranteed pensions with 401(k)-type accounts, and sharply reducing generous cost-of-living increases enjoyed by retirees. The Rhode Island legislature is expected to consider changes next month during a special session.

Until recently, most states, including Virginia and Maryland, have attacked their pension problems by cutting benefits for new hires while preserving retirement packages for current employees. Others have rolled over their pension debt by taking out loans or papering them over with what some have called unrealistic projections about investment earning and life expectancy.

But with states facing, by one estimate, a combined $3 trillion in unfunded pension liabilities and the economic downturn continuing to dampen government tax revenue, states are beginning to make changes once considered unthinkable — such as cutting pensions for people in retirement.

The “pension envy” felt by many people in the country should begin to lessen in the years ahead as early-retirees from the public sector are slowly squeezed in a multitude of different ways, none of which will be fun. Then, again, what they have will still be far better than that which is available to most retirees and aspiring retirees in the private sector.

There are shades of the housing bubble bust here, in that, people believed the unbelievable. A few years ago it was that home prices would rise in perpetuity and that we’d all be wealthy forever. Today, it’s the notion that governments can make good on the generous public sector retirement packages they’ve promised over the years.

You have to feel former fireman Donald Cardin as his retirement check is about to get cut in half while his wife is suffering from cancer. Then again, counting on keeping a generous pension for the rest of your life after retiring in your early-40s is about as sound a plan as expecting your home equity to pay for your kids’ education and fund your golden years.

Okay, okay. I changed the part at the end. It said something like “this is a challenging time” and “don’t hesitate to call” if they can be of any help, but, in light of all that’s happened lately, this seemed like it would be a lot more fun to pass along as they continue to debate raising the debt ceiling in Washington on this Sunday afternoon.

A Small City’s Depleted Pension Fund Rattles Rhode Island

The small city of Central Falls, R.I., appears headed for a rare municipal bankruptcy filing, and state officials are rushing to keep its woes from overwhelming the struggling state.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers’ pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.
…
The last American state to default on its bonds, Arkansas in 1933, got in over its head by trying to help struggling municipalities.More recently, when local governments have veered toward bankruptcy — Orange County, Calif., in 1994; Cleveland in 1978 — neighboring municipalities have found it harder to sell their own debt. During the New York City fiscal crisis of 1975, New Jersey suddenly found its bonds harder to sell.

“That type of contagion is what you’re trying to avoid,” said James E. Spiotto, a bankruptcy specialist at the law firm Chapman & Cutler, who is not involved in Rhode Island’s problems.

The word “contagion” is one that we might be hearing a lot more of here in the U.S…

There are lots of details in this report and it seems that all municipalities and states are going to face their own unique set of financing troubles. But, more likely than not, areas like Central Falls, where public sector workers are promised generous disability pensions and early retirement during which they get free health care will be the first to have problems.

Unions representing the 750,000 employees involved in the strike say their members are being unfairly treated. But Treasury figures released today expose how public sector retirement funds dwarf their private sector counterparts.

The calculations show that a mid-ranking teacher on £32,000 a year will receive a final salary pension that is the equivalent of having built up a £500,000 pension pot.

This is 20 times higher than the average private sector scheme, according to figures from the Office for National Statistics. Private sector workers would have to save more than 20 per cent of their salaries for 40 years – more than £500 a month for a similarly paid person — to amass the same amount in a defined contribution pension.

A well-paid London headmaster will retire with a pension scheme worth £1.5  million, the Treasury figures show. A chief constable retiring at the standard age of 55 would have a scheme worth more than £3 million.

My guess is that California’s public retirement system (that now includes 9,111 members in the not-so-exclusive $100K Club) would put the British pensioners to shame.

While the differences above are not large, they are significant and dubious changes to how inflation has been calculated over the years make the advantage of the pre-baby boom generation larger than it appears.  Small consolation for the younger baby boomers comes in the knowledge that many of the older baby boomers have failed to save as much as they should, making their retirement prospects little better than their own.

Bottom line – a declining standard of living is something the nation should get used to.