Aug. 21, 2002 — Many Americans middle age and older believe they will have enough money for a comfortable retirement — until they find out what retirement will actually cost — a recent survey found.

Sixty-four percent of Americans between the ages of 45 and 65 with household incomes of at least $75,000 said they were confident they would have enough money for a comfortable retirement, but after a reality check, only 32% said they were confident they would have enough, a survey commissioned by Charles Schwab & Co. found.

Data from the survey, in fact, suggests that they are saving far too little.

While 59% believe their living expenses in retirement will be at least the same or higher than they are today, the median level of accumulated retirement savings reported by survey respondents was only $104,000. More than half of the respondents (56%) said they had less than $250,000 saved; almost a third (31%) said they had less than $100,000. The average age of respondents was 52 years, with an average timeline of 11.8 years remaining until planned retirement.

Schwab maintains that an individual will need approximately $230,000 in retirement savings in today’s dollars for every $1,000 of desired monthly income in retirement. In other words, in order to produce an annual income of $75,000 today, a retiree would need $1.4 million in savings.

The survey shows that even higher-income individuals aren’t taking full advantage of retirement saving vehicles. In fact, 41% of those with some type of employer-sponsored retirement plan at work (whether a 401(k), 403(b), or 457 plan) contribute less than the maximum allowed. In addition, two-thirds (67%) have not contributed to an IRA this year, and at least 63% of these do not plan to.

Investors may not be fully utilizing an IRA because they believe they already contribute to a retirement plan at work, the survey also suggests. Some also wouldn’t contribute because their IRA is not tax-deductible.

Many of the respondents are not taking advantage of the retirement saving provisions of the Tax Relief Act of 2001, which increases the annual contribution limits for 401(k), 403(b), and 457 plans as well as for IRAs. An additional provision of the Act allows individuals age 50 and older to make special “catch-up” contributions in order to make up for lost time.

Only 29% have taken advantage of any of the new provisions or plan to take advantage of them by either contributing more to a 401(k) or IRA or by making “catch-up” contributions, the survey found. Women are even less likely than men to say they have done or plan to do this (24% women vs. 33% men).

The Schwab survey also asked respondents what impact the stock market decline and general economic conditions have had on their retirement savings. Not surprisingly, 87% of the respondents said their retirement savings were negatively impacted. However, men differed from women in the degree to which they said they were affected. Sixty-five percent of male respondents said they experienced a “significant decrease in retirement savings” vs. 53% of women.

Expectations for the future also differed by gender. More men than women say they “may have to postpone retirement” (38% men vs. 28% women) or that they are “reducing expectations for a retirement lifestyle” (35% men vs. 18% women).