It's time for some tough love. After all, I want you to have a comfortable retirement -- doing things that you enjoy and have always desired. That may mean dining in fine restaurants, traveling to the Galapagos Islands to see blue-footed boobies, or taking your grandchildren to Hershey, Pa., to eat chocolate to their hearts' content -- then coming home from these activities to your spiffy retirement community.

But judging from some startling statistics I discovered, you're in danger of a retirement that's quite the opposite. Picture dining on Salisbury steak TV dinners, traveling to the Git'n'Go down the street for a bag of chips, taking your grandchildren to the Salvation Army as you shop for some new clothes -- all while living in a relative's damp basement.

The facts
According to the 2006 Retirement Confidence Survey (RCS), we can be confident that many people will have gruesome retirements. In fact, according to a separate survey, 31% of Americans would rather scrub a bathroom than plan for retirement. Rest assured: If you've been putting off planning for your retirement, you're not alone. (I can't speak for the scrubbing thing.)

Check out the numbers from the RCS. They reflect the total savings and investments (not including the value of the primary residence) of today's workers, broken down by age group:

Retirement savings

All ages

25-34

35-44

45-54

55+

Less than $25,000

53%

73%

49%

44%

42%

$25,000-$49,999

12%

11%

14%

14%

8%

$50,000-$99,999

12%

7%

16%

12%

12%

$100,000-$249,999

11%

4%

12%

15%

12%

$250,000 or more

12%

5%

9%

16%

26%

Source: Retirement Confidence Survey (2006)

These statistics don't include Social Security payouts. Maybe there's a reason for that. I have at least two decades until retirement. In fact, I recently received my latest statement from the Social Security Administration and found out that the amount I can expect to receive at my full retirement age of 67 isn't much more than my current mortgage payment. My 30-year mortgage won't be finished by the time I hit the big 6-7, and my mortgage and tax payments will likely be much higher because of rising taxes. Making matters worse, it's possible that I -- no, we -- can't be entirely sure that Social Security will be around in much the same form in my -- no, our -- golden years.

Then there are pensions to consider. The truth is that darn few of us have traditional pensions anymore. An Associated Press article highlighted the issue: "In 1985, 89% of Fortune 100 companies offered traditional pension plans, but that had fallen to 51% by 2004, according to Watson Wyatt Worldwide, a human resources consulting firm. Some 11% of the plans in the Fortune 1000 were frozen or terminated for new employees, up from 5% in 2001." Companies that have recently frozen all or part of their traditional pension plans (or are slated to do so) include FedEx (NYSE:FDX), Sears (NASDAQ:SHLD), and DuPont (NYSE:DD).

I think it's better to rely instead on those factors that are under our control: our savings and investments.

What the facts mean
Let's say you're a typical 40-year-old working American. According to the table, there's about a 50% chance that your savings and investments total less than $25,000. Let's be generous and assume you have $20,000 socked away and you also have about 25 to 30 years until you retire. How will that money grow for you? Well, here's what happens when we assume that you earn the market's average long-term return of 10%:

  • 2007 (age 40): $20,000
  • 2017 (age 50): $51,875
  • 2027 (age 60): $135,550
  • 2037 (age 70): $349,000

Now, let's use some information I've gleaned from the Fool's Rule Your Retirement newsletter service: In order to make your nest egg last, you should conservatively plan to withdraw about 4% of it per year in retirement. So 4% of $349,000 is almost $14,000. That's about $1,200 a month. Will that be enough? According to an inflation calculator I used, what cost a buck 30 years ago will cost about $3.75 today. Assuming the same rate going forward, your $14,000 in 2036 will buy you what you can get for $4,700 today. So that $1,200 a month will feel more like $400. Startling, isn't it?

Another way to look at it is to realize that the 4% withdrawal rate should include inflation-indexed increases. So if you're taking out $14,000 in the first year of retirement (and inflation that year is 3%), the next withdrawal will be 1.03 times $14,000, or $14,420. Can you imagine how quickly your money will go? (Note: You can withdraw more each year. If you're taking out 5% annually over 30 years, you have roughly a three-in-four chance of not running out of money, but that's far from a sure thing.)

If you want to live off the current equivalent of $50,000 per year in 30 years, you can estimate that you'll have to withdraw $150,000 annually. If that's 4% of your nest egg, then that nest egg will need to be $3.75 million! Still startled?

It gets better ... and worse
This is, of course, just one (hypothetical) example. There are plenty of other concerns that can make matters better -- or worse. For instance:

  • Many of us have seen age 40 come and go, and we still have less than $25,000 socked away. Heck, 39% of Americans ages 55 and older are in that camp. Remember that we can all make the situation better by investing regularly. A rule of thumb is to save and invest 10% of your income (but more is better).
  • Many of us will have home equity to tap, if need be, in retirement. We'll also receive at least something from Social Security -- and perhaps even a little from a pension.
  • The stock market's return over the next 10, 20, and 30 years isn't going to match the historical average of 10%. It could be higher. Or it could be lower, meaning you can end up with a considerably smaller nest egg than you expected. It's similar with individual stocks. Look at Intel (NASDAQ:INTC) as an example. Between April 1997 and April 2007, its stock advanced roughly 14%. But over the decade starting three years earlier, between April 1992 and April 2002, its stock rose more than 1,600%. Similarly, Disney (NYSE:DIS) stock increased in value more than fourfold between April 1987 and April 1997, and didn't even double between April 1997 and April 2007. This doesn't mean these are bad companies or stocks. It just demonstrates how volatile stocks can be, especially over relatively short time periods.
  • Don't assume that your stash of company stock will save you. Having too much of your financial future resting on the fate of one company is risky, even if it's a good company. If you'd acquired shares of stock in Linear Technology (NASDAQ:LLTC) five years ago, for example, you'd be underwater today. Investors in Coca-Cola (NYSE:KO) who've hung on for the past 10 years are also in the red.

There's hope, we promise
Fortunately, all isn't lost. You needn't end up with a nightmarish retirement. Here's the tough-love part. If you take some action now, you can begin to set yourself up for a more comfortable retirement. So get going! Forget about scrubbing that bathroom for a while and tend to your retirement instead. You'll thank yourself later.

For retirement guidance, I refer most often to Robert Brokamp's Rule Your Retirement newsletter service. You can, and should, try it for free for a whole month. Doing so will give you access to all the past issues, which feature, among other things, a host of "Success Stories" profiling people who retired early and are willing to share their strategies. Robert also recently published the anniversary issue, "8 Steps to Ruling Your Retirement," in which he spells it all out for you -- start to finish.

Don't miss out anymore. Go ahead and take a free trial of Rule Your Retirement. It'll cost you nothing, there's no obligation to subscribe, and I'm sure you'll like what you see.

Here's to avoiding a gruesome retirement -- and securing a great one!

This commentary was originally published March 3, 2006. It has been updated.

Longtime contributor Selena Maranjian owns shares of Linear Technology and Coca-Cola. FedEx and Disney are Stock Advisor recommendations. Intel and Coca-Cola are Inside Value selections. The Motley Fool is Fools writing for Fools.