Feeling Bad About Retirement? You're Not Alone

If the financial crash has you feeling bummed out about your prospects for retirement, you're not alone. A recent survey by LinkedIn indicates that more than 80 percent of respondents didn't think they were still on track for retirement.

The poll had about 3,600 respondents, and while it's not exactly scientific -- no online poll really is -- its breakdowns of results by age, gender and job function are still pretty interesting:

• Not surprisingly, older respondents are more concerned about their retirements than younger respondents.
• Because of the financial crisis, almost 40 percent of respondents above age 55 felt that they would have to work an extra five years. And another 24 percent felt they would have to work at least a few more years.
• Among those under age 35, a plurality responded that it is "too soon to tell" how the meltdown has affected their plans.

In my experience, men usually feel more confident about their ability to build wealth and retire than women. But in this survey, they both appear to be on the same page -- worried.

Looking at geography, it turns out that people in Cincinnati, for instance, felt more confident about being on track to retire than those in San Francisco. I'm not sure how much we can read into that, but it may have to do with the lower cost of living in the Midwest.

Despite the poll's limitations, the findings strike me as mostly accurate. Most people I talk to today are pretty worried about their ability to retire. That's natural given the beating the financial markets are dishing out.

But it's one thing to feel bad, and it's another thing not to do anything about it. So here we are dazed and confused by the markets, yet with so many decisions about our financial futures yet to make. What do you do?

1. Don't get discouraged. These types of financial unwindings happen, and the odds are that a good portion of your wealth will be restored when the markets recover. But you do need to make sure you're taking the amount of risk appropriate for your age. Hint, if you're older, you shouldn't be taking huge amounts of risk with your life savings. If you've been too aggressive, consider being more conservative with your new contributions while you let the current balances recover.
2. Think of practical solutions to help you get back on track. Focus more on savings and paying down debt. Run a tighter household budget so you can squeeze more value out of your monthly income. Execute on the little things, because these small changes will add up.
3. Revise your expectations. Maybe it's just not possible to retire at age 62 as you had hoped. OK, 65 or 70 may work just fine. Or think about how to position yourself so that you can work part time into your 60s and maybe early 70s. The part time income can go a long way toward helping replace lost retirement savings.

Consider this example. In retirement, you can anticipate about a five percent distribution on your savings each year. What this means is that for every $100,000 you have saved, you could live off about $5,000 a year. So if your retirement plan lost $400,000, you could replace the expected income from those savings by earning $20,000 a year working part time. Then when the accounts recover, you can scale back on the work schedule.

Bottom line: The financial crisis has thrown a monkey wrench into everyone's plans, but you still have to make plans and forge ahead. Be patient and work on the problem from multiple fronts. There is no silver bullet. The solution lies in making small but consistently good decisions that help you build savings and pay down debt.

See also my earlier post with advice for those over age 50 who are worried about their futures.

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