Maybe your plans for retirement include dining in fine restaurants, traveling to the Galapagos Islands to see blue-footed boobies, taking your grandchildren to Hershey, Pa., to eat chocolate to their hearts' content -- and then coming 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.

It's time for some tough love, Fools.

The facts
According to the 2008 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. Clearly, if you've been putting off planning for your retirement, you're not alone.

Check out these numbers from the RCS, reflecting 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 $10,000






























$250,000 or more






Source: Retirement Confidence Survey, April 2008.

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, we can't even be entirely sure that in our golden years, Social Security will exist as it does now.

Then there are pensions to consider. 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 IBM, Citigroup, Hewlett-Packard (NYSE:HPQ) and Verizon.

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're a typical 40-year-old working American, there's a nearly 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? (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, 36% of Americans ages 55 and older are in that camp. To improve that situation, try to put 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 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.

Indeed, during the last decade the S&P 500 lost value, as did many generally strong stocks, such as Disney (NYSE:DIS). Meanwhile, Yamana Gold (NYSE:AUY), over the past five years, averaged about 29% per year, while Best Buy (NYSE:BBY) averaged a market-whomping 4% over the past decade.

Lastly, don't assume that your stash of company stock will save you, either. Having too much of your financial future resting on the fate of one company is risky. If you'd acquired shares of stock in CVS Caremark (NYSE:CVS) in January of 2001, for example, they'd have been underwater eight years later in 2009 (though you'd have received some dividends along the way). Some investors in General Electric who bought back in 1999 were recently still underwater by nearly 50%. E*Trade Financial (NASDAQ:ETFC) investors are even worse off. This doesn't mean these companies won't ultimately surge and reward us, but if anyone was counting on them to do so by a certain time, they've likely been disappointed.

There is hope -- we promise!
But all is not lost. 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 try it for free for 30 days (with no obligation to subscribe). Doing so will give you access to all 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 regularly 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 Fool contributor Selena Maranjian was intrigued to learn from her friend Dale Wettlaufer that there are 9.9 billion teeth in the U.S. She owns shares of General Electric. Walt Disney and Best Buy are Motley Fool Inside Value and Motley Fool Stock Advisor picks. The Fool owns shares of Best Buy. The Motley Fool is Fools writing for Fools.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.