Americans seem curiously confident that the cash they've squirreled away for retirement is sufficient.
Perhaps they shouldn't be.
A Pew Research Center survey in August found that two-thirds of middle-class Americans are satisfied they've saved enough for their golden years. Statistics, however, suggest most people haven't saved nearly enough.
Fidelity Investments, the nation's largest 401(k) administrator, reports that the average balance in its retirement plans was $72,800 at the end of June.
If you expect to retire at 65 and live another 20 or 30 years, that amount won't get you far.
It's no wonder that, according to the National Bureau of Economic Research, almost half of Americans are dying with less than $10,000 to their names.
Present takes precedence
So, if the math doesn't add up, why are Americans so satisfied about their seemingly modest savings?
"Retirement saving is one of the hardest things that humans have to do, in terms of our thinking," says Dan Ariely, a behavioral economist at Duke University. "When you're saving for something in the future, 30 or 40 years from now, you really have no clue about what you'll be getting. So it's no surprise that it's something most people can't do very well."
In short, present needs take precedence. Compounding matters: There is no consensus about how much to save.
Boston-based Fidelity Investments suggests a 40-year-old should have around two times his or her annual salary in savings; a 45-year-old, three times; a 50-year-old, four times; and so on, with the goal of having at least eight times your annual salary (ideally more) socked away by the time you retire.
That final target suggests that someone making $80,000 a year should have $640,000 saved for retirement, supplemented by other sources like Social Security.
That yields enough cash to live on about 85 percent of their former salary, Fidelity estimates.
While Fidelity's savings yardsticks aim for at least eight times your annual salary, others say that final number should be higher. Stuart Ritter, a financial planner for Baltimore-based T. Rowe Price, thinks you should crank your savings up to 12.5 times your annual salary.
Someone approaching retirement with a $100,000 annual salary who wants to maintain their lifestyle with 75 percent of that will need $50,000 a year from savings and another $25,000 from sources like Social Security.
Based on a 4 percent annual withdrawal rate, that means having a formidable $1.25 million in the bank.
Key strategies may help
Therein lies the pitfall of telling people how much they should save: The goal can seem impossible.
If you're struggling to meet your target, a few key strategies may help.
These include saving more, delaying retirement, downsizing the home, and moderating one's lifestyle expectations for the golden years.
Early intervention can help stave off pre-retirement overconfidence. New York City-based scientist Jean Siao, 39, perused the math and decided she hadn't saved enough.
Siao is clamping down on her budget, bolstering her Roth IRA and planning to ramp up her 401(k) contributions from the current 10 percent.
"Before, my saving was pretty sporadic, and I wasn't very disciplined about it," she says. "But now I know I'm behind where I need to be, and I'm saving as much as I possibly can."