It's time for some tough love. After all, I want you to have a comfortable retirement doing all the things you've desired.

Maybe you plan to dine in fine restaurants, travel to the Galapagos Islands to see blue-footed boobies, take your grandchildren to Hershey, Pa., to eat chocolate to their hearts' content -- and then come home to your spiffy retirement community.

But, judging from startling statistics, you're in danger of a retirement that's quite the opposite. Picture gnawing on Salisbury steak microwave dinners, taking a bus down to the Git'n'Go for a bag of chips, and bringing your grandchildren to the Salvation Army so you can shop for "new" clothes -- all while living in a relative's moldy basement.

The facts
According to the 2007 Retirement Confidence Survey (RCS), many Americans will have gruesome retirements. In a separate survey, 31% of us said we'd 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, by age group:

Retirement Savings

All Ages





Less than $25,000
























$250,000 or more






Source: Retirement Confidence Survey, April 2007.

These statistics don't include Social Security payouts. Maybe there's a reason for that. I have at least two decades until retirement, but my latest statement from the Social Security Administration informed me that the amount I can expect to receive at my full retirement age, 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 higher than they are now, because of rising taxes. Making matters worse, it's possible that I -- no, all of us -- can't be entirely sure that in our golden years, Social Security will exist as it does now.

Then there are pensions to consider. In truth, 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 frozen all or part of their traditional pension plans (or are slated to do so) include Nissan (Nasdaq: NSANY), Circuit City (NYSE: CC), and Hewlett-Packard (NYSE: HPQ).

What the facts mean
It's best to rely on factors that are under our control: our savings and investments.

According to the table above, if you are a typical 40-year-old working American, there's about a 50% chance that your savings and investments total less than $25,000. Let's be generous and assume that you have $20,000 socked away, and that you 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%:

  • 2008 (age 40): $20,000
  • 2018 (age 50): $51,875
  • 2028 (age 60): $134,550
  • 2038 (age 70): $349,000

Now, let's use some information from the Fool's Rule Your Retirement newsletter service: To make that nest egg last, you should plan conservatively and withdraw about 4% of it per year in retirement. A 4% chunk of $349,000 is almost $14,000, or roughly $1,200 a month. Will that be enough to live on in 2038?

According to an inflation calculator, what cost $1 three decades ago costs about $3.75 today. Assuming the same rate going forward, your $14,000 in 2038 will buy you what you can get for $3,733 today. That $1,200 a month will feel more like $320. Startling, isn't it?

And inflation just keeps going. 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 75% 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, 31% of Americans ages 55 and older are in that camp. To improve that situation, try to sock away at least 10% of your income through regular saving and/or investing. (More is better, of course.)

On the plus side, 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.

Then again, bear in mind that the stock market's return over the next 10, 20, and 30 years won't necessarily match the historical average of 10%. It could be higher -- or lower, leaving you with a much smaller nest egg than you expected. The same goes for individual stocks.

Let's look at Wal-Mart (NYSE: WMT) as an example. Over the past 25 years, its stock increased in value some 72-fold, or 19% annually. Yet recently, Wal-Mart's stock has been trading around where it traded at five years ago. Meanwhile, shares of The New York Times (NYSE: NYT) haven't even tripled in value over the past 20 years, gaining an annual average of about 5%. This doesn't mean these are bad companies or stocks. It just demonstrates how volatile stocks can be, especially over relatively short time periods, and what can happen if you buy at inflated prices.

Lastly, 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. If you acquired shares of Eastman Kodak (NYSE: EK) in the late '90s, for example, you probably experienced a very painful loss, with the shares having fallen by more than half. Many investors in Yahoo! (Nasdaq: YHOO) from the Internet bubble days are also very disappointed, having watched their stock fall from north of $100 per share to south of $5 per share (it has recently been in the high-$20s).

There is hope -- we promise!
But all is not lost. (Here's the "tough love" part.) If you take action now, you can 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 30 days. Doing so will give you access to all the past issues, which feature, among other things, a host of "Success Stories" that profile people who retired early and are willing to share their strategies. Robert also offers recommendations of promising stocks and mutual funds.

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 Wal-Mart, which is a Motley Fool Inside Value recommendation. Nissan is a Global Gains recommendation. The Motley Fool isFools writing for Fools.