Fidelity says pensions in good shape as replacement ratio rises to 58% -- Say What? (Bill Chirolas)

  Why do folks expect to get a defined benefit pension from their place of work that will replace 20 percent of their pre-retirement income after working in what is most likely a non-union company and after having voted into office Republicans that pass laws that keep labor unions weak?

  William Chirolas -- World News Trust

  March 14, 2007 -- Fidelity Research Institute announced back in early February the findings of its 2007 Retirement Index. The median working American household is on track to replace 58 percent of their income ($62,000) in retirement -- up from last years 57 percent.

  Fidelity reaches this conclusion based on the median working Americans having $22,500 in total household retirement savings, and anticipating they'll receive $29,500 in annual Social Security payments, with more than half (51 percent) expecting to receive a pension, with median benefits of $18,000 annually. The Fidelity Survey does say that just more than half (51 percent) of households expect to receive a median annual pension benefit of $18,000 -- but why do they expect this? The folks turning 60 this year have savings that now exceed the $100,000 mark (at $112,000) in average account balance in an IRA/401K.

  But why do folks expect to get a defined benefit pension from their place of work that will replace 20 percent of their pre-retirement income after working in what is most likely a non-union company and after having voted into office Republicans that pass laws that keep labor unions weak?

  And if they keep voting Republicans into office I am not sure that one-third of their post retirement income can be expected to come from Social Security. Defined contribution plans (401k. IRA, profit sharing) plus personal savings may well provide that 10-20 percent of pre-retirement income that most expect -- if the market holds up. By the way, for those asking how did the median income get as high as $62,000, that is the median projected income at retirement of the 2,000 folks in the sample -- it is not the average of their current incomes.

  As part of the Institute's survey of 793 retirees, age 55 or older, two-thirds reported their expenses either went up (39 percent of the group) or stayed the same (28 percent), when compared with just before retirement. But the study showed that most retirees (82 percent) expected their monthly retirement expenses to mirror what they were pre-retirement (34 percent) or go down (48  percent). Many retirees (55 percent) reported leaving the workforce earlier than planned. In fact, nearly one-quarter (22 percent) of retirees were forced to retire early because of poor health or a disability.

  The Index also found that one in five working Americans between the ages of 25 and 42 currently provide or expect to provide financial support in the future to their parents or in-laws as Gen Xers are becoming just as "sandwiched" as the baby boomers have been, by the need to care for aging parents, provide for their own families, and save for retirement.

  Data for the Index is collected annually through a national online survey of more than 2,000 Americans who work full time; are 25 years or older; earn $20,000 a year or more; married/partnered with individuals who are also not yet retired; and are the financial decision-makers in their home.

  The research summary report

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