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This is the worst retirement solution ever

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(Bloomberg Business) — Want to improve your chance of having a comfortable retirement? Just work longer to make up for your financial shortfall, we read. And a lot of people buy it. 

Problem is, health and employers don’t always cooperate.

A new report shows that while workers have steadily increased the age at which they expect to retire beyond 65—from 11 percent in 1991 to 36 percent when the survey was taken in January and February—the actual median retirement age has been stuck at 62 since 1991.

That’s one of the reality checks in the 25th annual Retirement Confidence Survey by the non-profit Employee Benefit Research Institute (EBRI). The report, which surveyed both workers and retirees, age 25 and up, isn’t all doom and gloom—the percentage of workers in retirement plans feeling “very confident” about retiring comfortably doubled from 2013 to 2015, to 28 percent. But just 12 percent of workers without retirement plans are “very confident” about retiring comfortably. 

First, the good news. Those very confident workers with retirement plans aren’t more optimistic without reason. The big jump in confidence shocked one of the co-authors of the report, EBRI’s director of research, Jack VanDerhei, so he dug a little. He looked at the change in account balances in his database of 401(k) plans, which covers 27 million participants. In just the year ending Jan. 1, 2015, gains ranged from a low of 19 percent to a high of 47.9 percent.

But whether they’re in a retirement plan or not, many of those surveyed don’t seem to be making big increases to their retirement savings, VanDerhei said. On top of the market gains, workers in 401(k)retirement plans might benefit from having their contributions automatically increased each year. And while 69 percent of workers said they could save $25 more a week than they are now (46 percent said not eating out or getting takeout would do the trick), they then go on to contradict themselves, with 50 percent also saying that the pressure of daily costs means they can’t afford to save that extra money. 

One of the most glaring areas where expectations and reality diverge in the survey is in the percentage of income that workers think they’ll need to replace in retirement: 56 percent think they should be able to live on no more than 70 percent of pre-retirement income. 

“I suspect most people are ignoring medical expenses,” VanDerhei says. “They magically think Medicare will take care of everything, and very few factor in long-term care expenses.” Once they do that, he says, that 70 percent estimate blows up, unless they’re lucky enough to have a good long-term care policy. If they’re luckier still and don’t need long-term care, VanDerhei figures people can probably get away with 100 percent of pre-retirement income. Yet just 10 percent of workers estimated that they’d need more than 95 percent of pre- retirement income in retirement.

Then there are those expectations of working longer, and the 10 percent of workers who plan to never stop working. Retiring before 60 was the goal for just 9 percent of workers surveyed, but was the reality for 36 percent, and not necessarily by choice. Twenty-six percent of workers said they would wait till 70 to retire; 6 percent of retirees actually managed that. Over the years, the survey has found that about 40 to 50 percent of retirees stop work earlier than planned, and the percentage was 50 percent in 2015. In this year’s survey, 60 percent cited health problems or disability, 27 percent cited changes at their company and 22 percent said the need to care for a family member was a reason for retiring before they had planned to.

There was some good news in those numbers, too. Thirty-one percent of retirees said they left the workforce earlier because they could afford it, and 17 percent said a desire to do something else played into retiring earlier than planned.

Still, it’s a risky proposition. “If you have a choice, take control of what you can control and don’t defer the pain until later, when you have zero control over whether you’ll continue to work or not,” VanDerhei said.

At the very least, think about giving up takeout and saving that extra $25 a week.