Retirement savings cut back

By BLOOMBERG NEWS | Monday, November 10, 2008

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The worsening U.S. economy is leading more Americans to curtail saving for retirement, according to a new TD Ameritrade Holding Corp. study.

The economy was cited by 50 percent of those who said they had stopped or reduced contributions to their retirement plans, said TD Ameritrade, an online brokerage. Unemployment and the cost of health care were other common reasons, cited by 32 percent and 25 percent of people surveyed.

Pressure on retirement account funding is expected to grow, as fewer U.S. employers offer traditional pension plans and the federal government struggles to shore up Social Security's long-term finances. General Motors Corp. will suspend company 401(k) retirement plan matching payments for nonunion employees beginning Nov. 1.

"It's not a time for people to stop contributing," said Diane Young, director of retirement and goal planning at Omaha, Neb.-based TD Ameritrade. "Because time is money, it's important to stay on track."

Even if consumers feel they need to reduce contributions to make ends meet, it's a good time to review retirement plans to make sure their assets are allocated properly, Ms. Young said.

The telephone survey of 1,005 U.S. adults was conducted by Opinion Research Corp. from Sept. 11 through Sept. 14. It has a margin of error of plus or minus 3 percentage points.

Overall, 46 percent of those surveyed said they weren't putting any money into a retirement plan. Of those with a plan, one in three, or 34 percent, including those over age 65, said they have less than $50,000 invested, compared with 21 percent who said they had more.

For those who have scaled back contributing to a retirement plan, 63 percent said they've stopped completely.

U.S. House Education and Labor Committee Chairman George Miller, California Democrat, estimated at an Oct. 7 congressional hearing that 401(k) plans have lost more than $500 billion during the past 12 months. At the end of 2006, the average U.S. 401(k) account held $61,346, according to the Washington-based Employee Benefit Research Institute.

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