Keeping Track: Retirement savings

Saving for retirement is "like pushing a ball up a hill," says Frank Armstrong, editor of the online financial-planning company DirectAdvice.com. "The longer you wait, the steeper the hill [seems]. And if you start early, it's the least painful way."

But according to a new analysis from Ohio State University, commissioned by the Consumer Federation of America and DirectAdvice.com, 56 percent of US households do not save adequately for retirement.

"The bad news is that most US households will not be able to sustain their present standard of living into retirement," says Stephen Brobeck, the CFA's executive director. "The good news is that most of the unprepared households could get ready by taking advantage of [such things as] the magic of compounding interest."

For example, saving just $25 a week for 40 years, with 5 percent interest yield, will result in an accumulation of $165,000, Mr. Brobeck says. That translates to $52,000 in actual investment and $113,000 in compounded interest.

The same study found that out of all households with retirement assets, only 54 percent have "adequate" retirement savings. Among households without retirement assets, only 17 percent have adequate retirement savings.

In addition to the Ohio State analysis, a related CFA/DirectAdvice.com public-opinion survey found that 59 percent of Americans expect that their standard of living in old age will be lower than it is now, owing to inadequate savings.

"Research shows that people with a financial plan have twice the money saved for retirement as those without," says Brian Hollander, DirectAdvice.com's chief executive officer. "The key is to develop and follow a comprehensive financial plan."

But you don't need to spend thousands on fees for financial advice either, Hollander says. "Technology and the Internet make it easier than ever today to develop a financial plan that will work for you."

(c) Copyright 2000. The Christian Science Publishing Society