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Are you an optimist or a pessimist when it comes to saving for retirement?
Most of us look on the bright side even when the odds are against us, according to the latest version of the annual Retirement Confidence Survey, released last week. It found most workers confident they will have enough money to live comfortably in retirement, including half of those who have yet to save anything.
Many expect their employers or Social Security to take care of them. Others have even less realistic plans, from inheriting money to winning the lottery. A common assumption is that continuing to work will be an option. In fact, two-thirds of workers plan to work in retirement, according to the survey, which is conducted each year by the Employee Benefit Research Institute, the American Savings Education Council and Mathew Greenwald & Associates. No doubt many of them will, though historically, 40 percent of workers retire sooner than they planned, often because of health problems or job loss.
Retirement pessimists are out there, too. Although the survey found them in the minority, they are the ones most likely to write me, fretting over whether they will be able to pay for health care or have enough money to enjoy retirement. Others are so pessimistic that they have given up worrying. Saving enough to retire seems hopeless.
Both optimism and pessimism are potentially dangerous because they can be paralyzing. If you don't think saving for retirement will make a real difference, why bother?
What we need is a dose of realism tempered by common sense. Some people will hit a Lotto jackpot and some will end up destitute, but it's not wise to proceed on the assumption that either will happen to us. Unless you'll be on the receiving end of a generous pension, your savings are likely to make a huge difference in your retirement lifestyle.
Even small amounts saved regularly over long periods of time can add up to a substantial amount. Save $100 a month for 40 years and you'll have $152,602 even if you only earn 5 percent interest. Put it to work at 7 percent and you'll finish with $262,481. Save $400 a month and you could end up a millionaire. The later you start, the more you'll need to save or the higher return you'll have to earn to reach triple-digit numbers. However, even smaller numbers can make a difference. If you're living on Social Security, a $50,000 nest egg means a lot.
Not sure how much you need to save or how to go about it? Individual meetings with a financial planner are the most beneficial, according to the survey. Also rated as helpful are seminars or group meetings and personalized benefit statements.
Q. My husband gave a car dealership a $5,000 deposit using my American Express card. Then the salesperson said the car was $6,000 more expensive than originally quoted and my husband decided against the sale. A few days later I began to receive loan application notifications from various banks declining my credit requests. Most of the letters stated that the reason for the loan being declined was an "excessive number of inquiries."
Because of this, I decided to pay $49 to pull my complete credit reports. I was appalled to find that the dealership had submitted a credit application to 17 different lenders, causing my credit file to be pulled 17 times in one day! At no time did I give the dealership permission to submit a loan application. I am extremely concerned about the repercussions this may have on my credit. Do you have any advice on how I should deal with this issue?
Take a closer look at your credit report. All car loan applications made within a 14-day period count as a single application in determining your credit score, said Craig Watts, spokesman for Fair, Isaac, the California company that compiles FICO scores. Furthermore, FICO scores ignore both auto loan and mortgage inquiries made during the previous 30 days, he said.
"She may have been been turned down due to inquiries, but not to inquiries connected to this loan shopping" experience, Watts said.
Contact each credit bureau to dispute the accuracy of anything you think is wrong with your reports. By the way, when you are turned down for credit, you are entitled to a free copy of your credit reports.
- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.