According to the AARP, three-quarters of Americans are too busy dreaming of financial comfort to actually work toward achieving it. For the sake of your future, you can't afford to be one of them.

The AARP's recent survey found that 75% of adults are counting on Social Security to fund their retirement, while 77% of them don't expect to have enough cash to live on comfortably in their golden years. I suppose they they think they'll get by with Social Security -- which means they probably don't know that as of June 2010, the average monthly benefit for Social Security recipients is $1,069, or just $12,828 per year.

What a mess!
That's clearly not enough for most folks to live on comfortably. And that's a big problem, since more and more people are pensionless. In recent decades, companies have increasingly curtailed "defined benefit" pensions to phase in "defined contribution" plans such as 401(k)s. Dozens of companies have frozen or shrunk their pensions for some or all employees. As the Bureau of Labor Statistics notes, the number of private sector defined benefit plans has fallen from 112,000 in the mid-1980s to just 30,000 a few years ago.

It's true that 401(k)s can be powerful wealth-builders, but only if you fund them aggressively and don't get whacked by bad luck -- such as having a year like 2008 happen a few years before you plan to retire. It's also risky to put too much of your 401(k) assets in your company's stock. Yes, you may know your employer better than you know any other company, but since no company is immune from disaster, diversification is still important. Who'd have thought that once-iconic names such as PanAm, TWA, RCA, E.F. Hutton, MCI WorldCom, and Woolworth would be long gone today?

Even though many of us need to, most people are not stuffing their 401(k)s to the gills. According to Vanguard, the recent average balance of the plans it administers was $69,000. That's not much to live off for a retirement that could last 30 years or more.

What to do
Fortunately, all is not lost. For one thing, Social Security isn't likely to go away, despite reports of its imminent death. It's arguably too big to fail, but that doesn't mean it's likely to provide you with riches in retirement. You need to accumulate a nest egg on the side to supplement what Social Security gives you, whether in a 401(k) at work or a Roth IRA on your own.

Your dreams can turn into a nightmare if you're counting on Social Security to fully support you one day. But with a little time spent planning, and perhaps a few more years saving, you can turn that dark vision into your dream retirement. 

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