Working Hard To Save For Retirement? Work Harder

Each year since 2006, Congress has declared the third week of October to be National Save for Retirement Week. But because of the weak economy and falling home prices, retirement experts say many Americans are in worse shape for retirement now than they were four years ago.

For one thing, fewer and fewer employers are offering the traditional pension plans that provide retirees with a set amount of money each month, based upon years of service. In 1975, about 35 percent of workers could look forward to getting monthly checks in retirement, according to U.S. Department of Labor statistics. Today, that's down to about one in four workers.

So instead of counting on traditional pension payouts, about 72 million workers are trying to prepare for retirement by investing through 401(k)-type plans, the tax-advantaged retirement savings accounts sponsored by employers.

Employer Match

But even these savings plans have become less attractive for many workers in recent years. Because of tough economic conditions, a number of employers have stopped offering matching contributions to plan participants. In 2006, 76 percent of employers with 401(k) plans were offering matching contributions for their workers. That number has slipped to 69 percent, according to a recent report by Schwab Retirement Plan Services.

Mike Shamrell, a spokesman for Fidelity Investments, said most people do want to save for retirement. As evidence, he notes that despite the recession, workers have been holding steady on the amount of money they divert into their 401(k) plans -- averaging around 8 percent of their pay.

"The average deferral stayed pretty steady" even when the economy tanked, Shamrell said. That demonstrates "a lot of very positive savings behaviors."

Hardship Withdrawals

Still, the hard times have forced huge numbers of workers to withdraw money from their accounts, he said. Many savers have found themselves in need of a loan to cope with the unexpected, such as the loss of a spouse's job. So they borrow from their 401(k) or make a "hardship" withdrawal, which triggers an array of penalties, taxes and fees.

Fidelity reports that in the first three months of this year, 45,000 people participating in its retirement plans took money out of their accounts. And then in the second quarter, the number jumped up to 62,000.

The weak economy is driving up concern about retirement saving. The Employee Benefit Research Institute, which studies retirement planning, does surveys on Americans' attitudes about retirement. As recently as four years ago, its poll found that 27 percent of respondents said they were very confident they could live comfortably in retirement. This year, just 16 percent said that.