Americans Aren't Saving Enough for Retirement

AMERICANS are still not saving enough for retirement.

Since the 1970s, net private savings have dropped from about 5.5 percent of gross domestic product to about 3.5 percent. That lags well behind the savings rate of other industrialized countries: Germans save twice as much; the Japanese save at three times the rate of Americans.

According to the Employee Benefit Research Institute in Washington, 7 in 10 Americans don't know how much money they will need for retirement.

Financial planners say it boils down to this: While personal savings, employer pensions, and Social Security - the ''traditional retirement-income model'' that has been in place for about a half century - are still intact, the nature of the system has changed.

Fewer employers today offer traditional pension plans, fewer people stay with the same employer long enough to become vested, the number of married couples is declining (they tend to save more), and people are living longer after retirement. In addition, some say the ''saving and planning ethic'' of earlier generations has fallen by the wayside.

So the Department of Labor recently launched a nationwide campaign to educate Americans about doing their part to meet their retirement needs. Spearheading the campaign is Labor Secretary Robert Reich. In an interview, he talks about saving for retirement.

Why are Americans saving less in private savings?

[This] is particularly remarkable given that the huge baby-boom generation, who are now in their 30s and 40s, are earning so much more. They're coming into their prime earning years. And although many households are having a tougher time making ends meet and have little left over to save ... we are a consuming culture. We are bombarded every day by messages that say: 'Spend, spend, buy, buy, consume, consume.' Very few advertisements say, 'Save, think about retirement.'

Many Americans don't think about retirement until it's too late to start an effective plan. Why?

Ideally, people would start saving early. [For] most people in their 20s, retirement seems hundreds of years away. In fact, when I talk to young men and women in their 20s about saving and retirement, some of them simply laugh.... But I tell them, in response, that even a little bit of saving now can go a very long way. Through the magic of compound interest, a relatively modest amount of saving in the 20s or early 30s can grow into a very solid nest egg.

If you started saving $5.70 a day when you were 30, by the time you were 60, you would have $112,000, adjusted for inflation.

Why won't retirement be as simple for future generations?

Many people don't realize that the entire pension system has changed dramatically over the past 20 years. More workers have to take more responsibility for their own saving. In the olden days, you could rely on a big company to do a lot of your pension-saving for you. Today, chances are that your company is only going to partially provide some pension plan or maybe not a pension plan at all.

[In addition] many people, when they change jobs, take money out of their [voluntary] pension plan and don't put it back in. They use it to pay whatever expenses they have at the time. They don't realize that they are paying a substantial penalty. They also often don't understand the importance of keeping savings in a savings plan.

How much should Americans expect Social Security to provide for retirement?

On average, Social Security covers about 40 percent of your preretirement earnings.... A relatively poor family can usually count on about 60 or up to 70 percent of their pre-retirement earnings being covered by Social Security.

* Information on savings and retirement is available from the Labor Department. Call (202) 219-9247.