SURVEY SAYS: Is Retirement Confidence Justified?

It’s a complicated issue (or perhaps not) – this week we asked readers why participants seem so confident.

There are a host of possible explanations, so not surprisingly, the most common response was more than one reason, cited by nearly a third of this week’s respondents (more on that in a minute).   However, the most common single reason offered was a misunderstanding about what it would take to be comfortable in retirement, cited by 28%.   Nearly 13% apparently found my list of 9 choices insufficient – opting instead for “other,” which was usually a substitute for “ignorance,” that they had never made an attempt to determine their retirement needs in the first place, or a “failure to face reality.”

Roughly 10% said participants were suffering from a misunderstanding of how much they should be saving, while 7% thought the confidence was a function of wishful thinking, roughly 6% saw it as a function of good intentions, and about 5% thought participants were counting on other sources of retirement income.

One reader noted, “If it’s not c and d, it’s got to be gross stupidity that seems to be as bad as the gross obesity we keep hearing about.   Oh wel,l I hear dog & cat food are offering more flavors.”

Looking behind the responses of those who cited multiple causes, the most common (25%) said that included a misunderstanding of what it would take to live in retirement, while one-in-five said participants didn’t know how much to save.   About 16% of the multiple choice group said wishful thinking was one of the reasons, while 14% opted for participants counting on other income sources, and nearly 12% included good intentions in their multiple cause list, while 9% said “other.”

One reason I didn’t list came up repeatedly in this week’s responses:  “I think some have a false sense of security as they see parents and grandparents getting by ‘all right,’ said one reader.   However, they went on to caution, “What they fail to understand or even consider, is that many of current retirees have income from db PENSION plans, and that many of the current workers are not so lucky.   In addition, many of the current retirees are covered by company retiree medical plans, but the majority of today’s workers won’t have any company-provided retiree medical coverage, so their retirement savings need to account for that additional cost as well.”

Respondents were as “guilty” as any one in terms of not having focused on the specific needs of retirement saving.   As one said, “Most never really do a calculation in the first place (that’s why they are misplaced) and (c) do not understand how much they will need.   I count myself in there sometimes, unfortunately, because I simply do not put the time in to find a reliable calculator and do the calculation – when I know I should.”

Or, as another noted, “When asked, they look around and think, ‘I don’t see retirees today on the street, or in shelters, or in welfare lines…so where is the problem?’   In fact, one reader said, “On the bright side, I can’t believe that previous generations were any better.   Somehow, people get by.”

One noted, “Financially confident?   Ha!   A, C, D, E, F, G, and I for Ignorant.”

Several noted the tendencies to put the issue off, or defer it for more pressing concerns.  “I believe the real issue is closer to – failure to actually evaluate the situation at all.   You can’t force someone to take difficult actions on something they don’t even want to think about,” said one reader.   Another opined, “Participants are dealing with ‘here and now issues’ like health care, college expenses, elderly parents, etc.   They believe they’ll deal with retirement when they get to it.   That may be naïve, but it is also reality.” 

But this week’s Editor’s Choice artfully combined our choices to craft what may be the ultimate explanation of the phenomena: “Wishfully thinking of counting on other sources of retirement income with good intentions but misunderstanding what it will take to be comfortable in retirement and how much they should be saving, because of the overly optimistic retirement calculators combined with failing to look at their retirement savings statements.”

Thanks to everyone who participated in our survey! 

Mostly, employees are counting on income from other sources (including their homes, former employment DB/DC plans).   Secondarily, they plan on working beyond retirement in some capacity.   Third, they underestimate how much they will need in retirement.   Fourth, they underestimate how much they have to be saving now to make that happen.

I think it's a) wishful thinking.   Nobody wants to think that they'll be competing for the Wal-Mart greeter job one day.   I think there's still some Social Security denial out there - lots of boomers think they'll retire on the backs of Gen Xers like me.   NOT!

Survey Response:   "H" and "J":

"H" - A combination of a, c and f

"J" - I think some have a false sense of security as they see parent and grandparents getting by "all right".   What they fail to understand or even consider, is that many of current retirees have income from db PENSION plans, and that many of the current workers are not so lucky.   In addition, many of the current retirees are covered by Company Retiree Medical Plans, but the majority of today's workers won't have any Company-provided retiree medical coverage, so their retirement savings need to account for that additional cost as well.

My vote is "c".   A lot of people do not know how to save for their next purchase (vacation, car, washing machine, etc.) much less for something that may be 20, 30 or more years away.   Most people have the mentality that if you want to buy something, just put it on a credit card or get a loan. You can't do that with retirement!

I'll vote for h), a combination of factors.

Whenever the Baby Boomers have been faced with a choice between saving and immediate gratification, they have chosen the latter. Why should saving for retirement be different? Given the choice between a vacation, a new SUV, remodeling their house, updated wardrobe, you name it, and saving for retirement, Boomers will not choose a significant change in their lifestyle.

A related concern is Boomers who choose early retirement at an early age, without a good understanding of inflation and increasing medical costs. What happens when this group hits 70 and is out of cash?

I think mis-placed confidence (j) without a doubt - to me the reason is two-fold: (i - Other) most never really do a calculation in the first place (that's why they are misplaced) and (c) do not understand how much they will need.   I count myself in there sometimes unfortunately because I simply do not put the time in to find a reliable calculator and do the calculation - when I know I should.

I think it's a combination of c and d: wishful thinking and misunderstanding how much they should be saving. Among those who think seriously about it at all, they probably figure that since there aren't many retirees out there living in cardboard boxes and eating cat food, somehow they'll probably be ok, too. Makes me think of the story of the man who jumped off the who is heard to say as he passed each floor, "So far, so good."

c) misunderstanding what it will take to be comfortable in retirement and (d) misunderstanding how much they should be saving,

I think the majority of people out there just don't understand what they will need in retirement there are other life pressures ahead of that. Plus those 15 years out or so, see retirement through the prism of their parents:   The nice DB benefit, social security, health care to agree.   On the other hand the GenX's see retirement as not realistic they probably (many of them) witnessed their parent(s) at one time or another being laid off in the 80's early 90's.   Yet the Irrational exuberance brought another type of person who believes he/she will take care of himself and retirement is not in the equation.   It is the first group that is really delusional to a degree about retirement   and also has a shallow understanding of finances.   Just my ramble.    No scientific basis.,   but an issue I deeply care for.

My answer would be (h).   Probably all of the reasons (a) through (g) play a part.   It would be interesting to have a crystal ball to look about 30 years into the future.   If we had that, I bet more people would get on the saving bandwagon.

Having worked with people in a number of work situations for the last 30 years, in my opinion people are "confident" they will be OK in retirement because:

1. People do not want to face reality.     I worked with a couple in their early 40's.   He was self-employed & had not retirement savngs; she had just be laid off and had about $28,000 in a company retirement plan.   They said they could not afford to save any more for retirement, yet they thought   they would be able to retire at age 55!   No inheritance was coming them and his business would not sell for much.

2.   People have not realistically looked at how much it will take for them to live in retirement and how long they may live.

3.   No one wants to give up anything now to prepare for the future.     The "have it now and worry about the future later" mindset is alive and flourishing.

(i) To me it's obvious, we in the business are so close to the issue and focused on the future that we have blinders on.   The majority of participants, not all, but a majority, do not focus on retirement or the future.   When asked, they look around and think " I don't see retirees today on the street, or in shelters, or in welfare lines...so where is the problem?"   They believe they will be able to subsist just like the participants of the past who are now retirees and own their homes, or make their apartment rental payments, clip coupons, do without luxuries, work part-time jobs, or do whatever it takes at that time to make ends meet. Until then, they have more immediate problems, such as making current house or rental payments, putting food on the table, getting and keeping a job, putting their kids through school, keeping their cars running, etc. etc. etc.   Retirement is too far off to be concerned, but they have lived these problems in the past and thus, have confidence they will be able to deal with them in the future.   After all, the previous generations generally have been able to...so it can't be that hard, right?

(i) other - failure to face reality.

(i) other? Denial -   Just like you don't want to plan on dying, I think   that a lot of people (including me and I'm 50) can't envision   themselves getting old.

My true cynical answer:   "Yes."   Even as I stumble forward for myself, from a theoretical position of strength, ie knowledge...

In the confines of the provided answer, "h" with basically all factors involved:, (a) wishful thinking, (b) good intentions, (c) misunderstanding what it will take to be comfortable in retirement, (d) misunderstanding how much they should be saving, (e) overly optimistic retirement calculators, (f) counting on other sources of retirement income (a la an inheritance, working post retirement, etc.), (g) failing to look at their retirement savings statement,

RE: Financially Confident?   Ha!   A, C, D, E, F, G, and I for Ignorant

If its not c and d, it's got to be gross stupidity that seems to be as bad as the gross obesity we keep hearing about.   Oh well I hear dog & cat food are offering more flavors

Retirement preparedness surveys always remind me of two old jokes: (1)'What's worse, ignorance or apathy?' 'I don't know, and I don't care.' (2)A CPA responds to an angry client standing in front of her with a shoe box full of haphazard receipts and papers, "You don't know where you've been, where you are, or where you're going, but because I can't do it for you, it's somehow my fault."

Retirement plan participants too often choose apathy and ignorance, then seek to blame someone other than themselves when they finally realize that they are the sole source of their future income.

Building a nest egg is like starting your own business: it always takes much longer and much more money than you'd ever expect, and in the end, the only person that you can truly count on is yourself.

My experience has been that the lack of savings situation is due to (h) a combination of a-wishful thinking, b-good intentions, and c-misunderstanding what it takes to be comfortable in retirement.   Other recent surveys support this.   Calculators and internet advice can be provided until we are blue in the face, yet participants don't use them.   I have been preaching "Plan for the Future" in a big way at enrollment meetings because I believe that most participants have never even looked at what they will need at retirement and what it will take starting today to get there.   Without doing that step, they can very easily think that they have plenty of time to start putting money away and intend to do so just as soon as they get caught up on their finances.  

Only it doesn't work that way, does it?   After many years of doing enrollment meetings, I can say that the question I have heard most is "What should I do?"   I've begun to think that some of the automatic enrollment/increase plans are a good idea with a default stock/bond fund allocation and have even pulled out my plan documents to see how we might start implementing it.

In response to you survey question: why you think participants ARE so confident.

My short answer is (c)misunderstanding what it will take to be comfortable in retirement,

My longer answer is that people just don't take the time and effort to do serious retirement planning.   I am amazed at how the baby boomers have become such an entitlement generation.   To them, retirement is something that you "get" to do when you turn sixty.   They seem to have forgotten the important other half of the equation, doing their part to fund a longer, more expensive(health care!) life past sixty.   Early in their careers, the retirement game shifted responsibility to the individual and only a small percentage (those working for large companies) had the right vehicles in place to save.   

Many boomers will soon find the retirement myth shattered when they can't afford health care, and must continue to work to make ends meet.

A,C, or D and None of the Above.   I believe the real issue is closer to - failure to actually evaluate the situation at all.   You can't force someone to take difficult actions on something they don't even want to think about.

On the bright side, I can't believe that previous generations were any better.   Somehow, people get by.

(i) Other. Most of us are lying when we say that we have to plan for retirement and death.   Until faced with overwhelming proof to the contrary, few of us believe that we will actually get old and die. How many of the people who are not concerned about funding retirement have written their wills?

I think it is all of the above!

I would say (i) other, because quite simply and unfortunately, they have no clue what lies ahead.

In response to your survey on saving for retirement and having handled more than 1000 corporate retirement enrollment meetings over my 15 or so years in the retirement consulting business (and being a CFPâ„¢), I find that there are multiple reasons with the majority of people: (c) misunderstanding what it will take to be comfortable in retirement, and (d) misunderstanding how much they should be saving.  

Even when an employer provides matching contributions, many people don't take advantage of "free" money and are simply uneducated or possibly not motivated and living for "today".   A suggestion is more preparation/education at the high school level (or before) on basic investing concepts, compounding and the time value of money as well as providing insight to a person's life in retirement.   Once we address these issues and a plan participant understands better the risks of not saving, participation levels increase significantly.

As is typical of Americans in general, people are looking for simple "sound byte" solutions to complex issues.   I believe that the issue has several parts:  

(a) Most of the data deals with too broad an age group.   Most surveys cover people 21-65 or so and the data is, therefore, very muddy.   You need surveys which are carefully segmented by age to get meaningful data.   Younger participants are not "confident", they are just "oblivious" - retirement is something they will worry about later, much later.

(b)   Many older participants are looking to multiple sources of retirement income, not just their IRA or 401 k.   They look to a combination of Social Security, some DB income, the equity in their house and their DC plan as a whole.   In that vein, a relatively small DC balance may not be that threatening.

(c) Finally, as evidenced by Maslow, participants have a hierarchy of values.   Retirement is only one among many financial priorities, several of which have a greater urgency.   Participants are dealing with "here and now issues" like health care, college expenses, elderly parents, etc.   They believe they'll deal with retirement when they get to it.   That may be naive but it is also reality.   With too much month left at the end of the money, they can't worry about too much life left at the end of the money. (NOTE:   Bureau of Labor Statistics on Household Expenditures for 2002 show all income categories below $40,000, spend more than their total income every year.)

(h) more than one of the foregoing (which ones?)

(c) misunderstanding what it will take to be comfortable in retirement,

(d) misunderstanding how much they should be saving,

(f) counting on other sources of retirement income (a la an inheritance, working post retirement, etc.),

I think it's a mixed bag of wishful thinking, no clue how much is actually needed, and a good dose of 'head in the sand' mentality. I have a defined benefit plan, defined contribution plan and a personal IRA and I STILL don't think it's enough! Maybe I'm the deluded one, but I really don't want to be working full time at 80 years old!

When I read those Merrill Lynch survey results, I was flabbergasted.   I wondered what the results would be if they surveyed those of us in the retirement industry.   I think the confidence is a combination of (c) misunderstanding what it will take to be comfortable in retirement, and (e) overly optimistic retirement calculators.   Say you think you'll need $60,000/yr for retirement.   But what if retirement is 25 years from now? How much would you have to have then to equal $60,000 in today's economy? Many retirement calculators don't take inflation into consideration, or do so only marginally.   Also, with medical advances, people might be easily living to 100 by then.   Of course, you have to PAY for that medicine/treatment/whatever, during your retirement of 35 years!   I am 38 years old, have saved about $75,000, save another $16,000 (between my own deferrals and my employer's contributions) each year, and I imagine myself working forever and/or ending up destitute.   Perhaps *I* am overly pessimistic, but I still can't fathom why people are so confident.

I believe participants understand in general what it takes to provide for retirement.   Heaven knows they have plenty of opportunities to learn.   I believe they just procrastinate and "put it off".   People in our society live for today and have very short range outlooks on most things.   Just look at the stock market and investors concern for short term results versus long term value.   They don't have time or take to the time to plan long range.

I think that employees are overly optimistic about their retirement savings because of both (a) wishful thinking and (b) good intentions.   We have a fairly large and representative group of employees (300 blue collar and 400 white/pink collar), and most of them (20 somethings aside) understand what it will take for them to live comfortably and know how much they should be saving for retirement.   Although many are on the right track, a sizable number just never seem to get around to doing the right thing.   They intend to get in the plan or increase their contribution rate, but always seem to have something (new car, boat, kitchen, TV, credit card bill, etc. etc.) that gets in the way.   They are always just a year away from putting more into their retirement.   The years slip past, and before they know it, they are retirement age.   They then have to postpone their retirement, or supplement it by taking a part-time job - not because they had planned to - but because they have to.

And those 20 somethings?   They are just too young and have too many other financial needs/desires to seriously consider starting to save for retirement, which is oh so far away.   I didn't get it then, today's generation doesn't get it, and I'll bet that no matter what kind of education programs are put into place, tomorrow's 20 somethings won't get it either.

Survey question - Combination of a, b,c,d,f and ignoring the possibility that any of us could experience poor health, need nursing or assisted living in our later years.   We all assume that we will be healthy and able to work, plus able to obtain jobs, if we choose to work the rest of our lives.

(c) misunderstanding what it will take to be comfortable in retirement.

I think that people will continue along the way they are currently funding their retirement plans living for the moment.   As employees approach retirement, some will continue to work and others, as one retiree recently informed me, "I'll just drop my health insurance and let the government pay for it."   Another tax for the people who either did save or who continue to work.

K all of the above.

I'll go with C, D and I.   I firmly believe that most people simply do not think to compound the monthly amount they will need post retirement by their life expectancy. Therefore $100,000.00 or $150,000.00 will seem like a lot of money, especially for someone that may only make $30,000.00 or $35,000.00.   Few people use the calculators available to them on the various web sites. I have helped folks go through the exercise and I will tell you, the amount needed was usually so out of proportion to their (k) balance and so seemingly unattainable based on their salary that they just go into shock.   I'll usually get this "I'll never get there, so the formulas are wrong and I'll not worry about it" comment.   You know the ostrich syndrome.  

I think the majority of people out there just don't understand what they will need in retirement there are other life pressures ahead of that. Plus those 15 years out or so, see retirement through the prism of their parents:   The nice DB benefit, social security, health care to agree.   On the other hand the GenX's see retirement as not realistic they probably (many of them) witnessed their parent(s) at one time or another being laid off in the 80's early 90's.   Yet the Irrational exuberance brought another type of person who believes he/she will take care of himself and retirement is not in the equation.   It is the first group that is really delusional to a degree about retirement   and also has a shallow understanding of finances.   Just my ramble.    No scientific basis.,   but an issue I deeply care for.

I think that people are both lacking an understanding of how they will need in retirement, and they are counting on other sources of income that may not be guaranteed.

I have been puzzled by this issue for years particularly as I have read the EBRI studies, and here is my conclusion.   Our parents didn't fuss and worry about saving for retirement, and seems like they did OK, so its probably going to be alright for me as well.   I also think it is something like flossing our teeth -- every time we go to the dentist, we hear that we should do it more, we dutifully nod our heads, and plan to do it but ... and since my teeth haven't fallen out yet, it probably will be alright in the long run.

I have to borrow the acronym IMHO since I've never asked my participants why they don't understand what they're doing.   I will say of my group I have 10 to 15 percent who do maximize by saving the most they can.   We only have a hand full of the non highly compensated who raised their deferral percentage to max out at this years $13,000.   Once we allowed deferral over our old limit of 15% we did get a good group who went over the old level.   Several of those and a few who are over 10% also do other investing/saving.   I think they get it.  

I have to go with the (c), (d) combination.   Most people I deal with just have a complete misunderstanding of exactly what money is, how it works, today's average longevity, how critical the time factor is for most of us, and just not understanding that we more than any generation since WWII are largely on our own.  

Our government has done us a great service by increasing limits on 401(k)'s, IRA's and Roth IRA's.   If they continue this trend by adding even better savings tools and they take hold then maybe Congress will seriously look at the very real and needed repairs that must happen with Social Security and Medicare.   The social programs need to revert to being a very basic safety net and not the main plan.   It's a warm and fuzzy thinking someone else is out there to take care of us should we need it but the basic principle of getting government out of our way and allowing us to thrive unencumbered is what makes us American.   

I certainly agree that their confidence is misplaced.   I believe the target amount needed in retirement is illusive to most people, which makes me think (c) misunderstanding what it will take to be comfortable in retirement is one of the primary reasons for their misplaced confidence. I think perhaps they believe their expenses will be much less in retirement than they really will be, or either they choose to ignore the potential risks that aging and declining health will have on their wallets.   Another possibility is that they may believe that, by the time they retire, the government will have social plans in place that will pay for those big ticket items like nursing homes, prescription drugs, in-home nursing care, etc.

(B).   And the fact that people think there will always be time to "catch up" later.

I couldn't help but feel you've been reading my mind.   As a member of the group getting closer to retirement and a professional in this area, the topic hits close to home.   I think the answer is a combination of misunderstandings; misunderstanding how much will be needed, how much has to be saved, how long the nest egg will last, how to use the savings calculators we spray all over, etc.   Top that off with the propensity of the population to spend and live for today and we have a looming social crisis that will cause excessive heartburn in the Government and with the following generations.   Ours is generally an optimistic country but that optimism could be leading to an uncertain retirement.   Guess I need to practice "Would you like fries with that?"

I think that it's all of the above, with the possible exception of overly optimistic calculators.   As the manager of a customer service unit for a large (38,000 participants) defined contribution retirement plan, we talk to participants all day.   Predominantly, they want their money out of the plan to spend it on current needs.   Admittedly, our universe is predominantly younger, lower-paid blue-collar workers, and we do have a good share of serious savers, but I find that an "I'll do that later" attitude predominates.   That eliminates all serious considerations of how much they'll ultimately need or how they're going to get it.

I'll have to go with (a) wishful thinking.

A few months back I posted an article on a bulletin board about retirement calculators that scared the heck out of a few employees who are close to age 50.   They have begun researching and attending seminars on retirement planning.   They have been very vocal to anyone who will listen about how wrong they were to think things would just work out without any active planning.   I am very happy to see that this has caused a lot of others to really start looking at what their future holds - or doesn't hold.   I think this is great, as you know most employees feel everything an HR or benefits person gives you doesn't deserve a second look . . . but have one of those educated employees spread the word - and it suddenly makes sense!

Based solely on plan participants I've met with (majority blue collar, factory, undereducated) (c) would be the most accurate answer.   Secondly, (f) as many are depending on the retirement benefits of spouses and winning the Lottery.   Finally, many people are planning on working right through the "golden years."   Thanks!

I think it is mostly a combination of i- other (avoiding thinking about it entirely and by avoiding, assuming the best), a- wishful thinking (when it is considered, hoping for the best) and b- good intentions (sort of like New Year's resolutions, when the problem is finally recognized, you "resolve" to fix it but really don't follow through). Sad, huh?

My answer to your survey is: H---more than one of the above.   They are: a,b,c,d & e!!

People who think they are saving enough are not.   People are either scratching and clawing from paycheck to paycheck or, if they don't have to do that, they are living WAY BEYOND their means.

As a result, very few of us are putting away enough money for a comfortable retirement.   Additionally, there are not enough well designed, fairly priced Long Term Care policies out there.   Everyone from the age of 30+ should be looking into LTC for themselves and their parents!!!

Regrettably, it seems that since we are all living longer (not always better), the costs of taking care of ourselves and our parents will strip away most of the savings we have.

It's a bitter, bitter pill....but we ALL have to start SAVING MORE and SPENDING LESS!!!  

The old story about the Ant and Grasshopper still holds true!

Using myself as an example, I haven't saved enough for retirement and I will be 45 this summer.   We have already gone through all the inheritance money we will ever see, so I can't rely on that. So I have to say (i) other.   I really think that middle income (two spouses earning less than $100,00 per year) are all struggling to live today, mortgages, children, college tuition, food and now gas.   They don't have the extra each month to put away for retirement.   It's one of those things "I'll worry about when my kids are grown".   Or, the spouse isn't working due to layoffs, job eliminations and only one income is coming into the house so there is no need to worry about retirement, paying the bills is more important.   That's probably the reason so many don't have enough in their plans Those that are saying that they are confident they will have enough for retirement are probably (a)   wishful thinking.   Employees today saw their parents making it on SS so maybe they think they will be able to too.   I also don't think we as plan administrators do enough to educate ees on the needs for retirement.  

So I guess the problem will be that there won't be enough Walmart greeter positions for all of us who haven't saved enough for retirement.   Then what will we do!?!

ignorance

H - A, B, F and I

For those who are actually saving and participating in their retirement plans wishful thinking and good intentions are all we have to go on and this confidence is well-placed. There are no guarantees but doing something is better then nothing. For those who believe in counting on other sources of income are missing out on the big picture and gambling with their future. This confidence is miss-placed. Life is like a game of chess. You need to be thinking ahead with every move.

Definitely (i) other, one word sums it up-ECONOMY.   With the cost of everything increasing, the only avenue my employees feel they have is to decrease their deferral percentage and take loans on their existing accounts.   We have taken several educational steps and even hired an outside consultant to help them understand their personal needs in the future.   They know and want to set aside more money for their retirement but they cannot afford it.   Bread is $1.50, milk is $3.00 a gallon and gas is $1.85 a gallon for regular, the daily living expenses are taking more and more of their paychecks.   We are in the South (where it is suppose to have a lower cost of

living) so I can only imagine what the expenses are in the North.   We as a Company cannot afford to give raises to offset the increases our people feel.

I think the people in the survey are completely out to lunch.   There's no way they're going to have a nice retirement package if all they've got is $51,000 now.

They must be: Wishfully thinking of counting on other sources of retirement income with good intentions but misunderstanding what it will take to be comfortable in retirement and how much they should be saving, because of the overly optimistic retirement calculators combined with failing to look at their retirement savings statements.

The option wasn't listed, but how about "All of the Above".

I think it's (k) a combination of several things.   I recently went to a "developing wealth" seminar that suggested we save between 10-15%, but not less than 10%; our average 401k contribution rate is right around 5% so 1) I don't think people have a CLUE as to how much it takes now to pay for later.   Then, the government's "cradle-to-grave" social mentality (ss, medicaid, Rx, etc.) breeds complacency that has 2) contaminated the individual's spirit/ambition to be self-reliant.   Another problem I see directly, all too often, is that 3) people raid their accounts for silly loans or worse, hardship w/d's, in some cases on a revolving basis; WHAT are they thinking?   And lastly, people are so casual and informal about serious matters these days that 4) they give a half-a**ed effort to all the things you listed as possible answers---it's apathy man, apathy.   Somebody needs to stick a fork in us and get our attention.   But..ahh, who cares...   Exactly.

Plain ignorance.   They believe what people tell them (these are the same people who are probably voting for John Kerry).

Survey (H) --- C.d.E,G

Regarding the overconfidence of those surveyed, I think individuals:

1. do not realize the size of the nest egg they will need

2. believe (based on Wall Street's strong message of the value of equity investing) that they can catch up later because you can do so well in the stock market. Financial Services firms and magazines (such as Money) have touted the message that everyone can make a lot of money. 3 do not realize how long they will need money in retirement

Regarding the survey, I think it's (h): a combination of (c), (d), and (f).

I choose answer "h"   -combination between (a) wishful thinking (d) misunderstanding what it will take.

I believe many people live in a financial facade.   They equate large homes and expensive cars and clothing to wealth -without consideration for the ever ticking time-bomb called interest.   It isn't too difficult for lower-wage earners to "acquire riches" and play along in the masked charade of status quo.   Purchasing power is confused with income as well as consumption with acquisition.

I think the confidence is not well placed.    Else where in today's digest you say that participants have   an average age of 46 and an income of $55,000, respondents have only accumulated average savings of $51,000.   Well with just $55,000, it's not going to be pretty.   

Our company is young so people generally leave   and DON'T retire.   We don't offer installment payouts so we don't have to deal with the few retirees we actually have.   If people are facing financial problems in retirement, we don't hear about them. People need to save more, a lot more! Our plan   now allows   deferrals up to 75% of   earnings subj. to   the IRS max, plus we allow catch-up. This means some one   over 50 could save $16k this year plus get another $5k or so in match and profit sharing.     Sadly those that need to save the most can probably least afford to do so.   I've NEVER contributed anything less than the max to any plan in which I participated and now have the retirement savings (>$700k)   to prove it.    I always believed in pay yourself first.

I would say (h).. it comes from almost all of the previous reasons.. but most of those reasons, I believe derive from (c). I don't think it's from reason (e) because even overly optimistic assumptions, unless they're grossly overoptimistic, would show how poorly situated most people are.

Combination of (a), (b), and (i)--I think that there is a strong element of participants intending to save, but when more immediate financial considerations come into play (esp. paying bills that are due), saving for retirement gets put on the back burner. Individuals know that they should save for retirement, but like many other things, it is sometimes easier said than done.