Adequate retirement income looms as growing concern to Americans

The question for many Americans is not whether the social security and private pension systems are strong enough, but whether they will have enough income from all possible sources to live comfortably after the paychecks stop.

Social security benefits are the primary source of income for millions of retirees. Despite the furor over the soundness of the system and calls for changes, monthly benefits will continue. The trouble is, social security alone is hardly enough to provide a comfortable living in older years.

Private pensions will supplement these benefits - but only for about one-third of those retired. Moreover, studies show that the average private pension in 1980 was $3,870 a year, with no provisions for cost-of-living increases. And because of job changes and the failures of some plans, many of those under private programs may never collect pension benefits.

It is generally believed that retirees need less income. The facts found in government and private studies show that a retired couple may live comfortably on less - but not much less. Estimates range as low as 55 percent of pre-retirement income for a frugal life style to 78 percent to 80 percent for a quite comfortable life with some small luxuries.

Many of those without private pensions to supplement social security are from the white-collar middle class and women in the work force. Of these, roughly one-third, most of them with incomes of $10,000 or more annually, have managed to save money to supplement social security benefits. However, there may be problems in the future as inflation continues.

The solution recommended by financial planners is to begin thinking about retirement years while there is time to do something to make them more comfortable. Time can be a very steady ally in savings and investment programs.

It is not enough to begin preparing when retirement time approaches. Planning should begin at least 10 to 15 years before paychecks stop. Even that is cutting it close for a sound investment program. Most advisers suggest serious planning should begin in the mid-40s, a time when a family is established and monthly costs begin tapering off.

At whatever age a start is made, the first step is to take a good, close look at resources. Particularly consider whether assets are working productively enough for you.

While it may seem comfortable to watch a substantial balance build up in a checking or savings account, you are earning only 51/2 percent or less on this money; balances build up very slowly.

If you expect to need income in retirement to supplement social security and a private pension, consider options for your surplus reserves. Although annuities have lost some popularity because of individual retirement accounts (IRAs) and other savings programs offering relatively high earnings, investing in an annuity remains a sound way of adding income for older years. Annuity plans vary but generally every $1,000 put into an annuity will provide $95 a year ($7 or $8 a month) of added retirement income. Obviously, a much larger annuity will be needed to make up the substantial gap between anticipated income and needs. For instance, a $20,000 annuity would be required to bring in $150 a month.

To build an annuity of that large or larger, you will need to start it as early as possible.

If not an annuity, what? IRAs are popular and offer many advantages. So do Keogh plans for the self-employed. Both offer enticing tax savings.

Then, there is the confusion of alternative savings plans offered by banks and savings and loan companies and other financial houses. A little more than a year ago, banks were offering 15 percent or more interest on some fully insured deposits. With inflation calmed somewhat, rates have dropped, but 9 percent to 10 percent interest is still available.

The variety of savings plans and strong competition for deposits make this a confusing time for savers. Daily papers seem to offer something new every week. Anyone wanting to take advantage of the opportunities available would do well to talk with trusted bankers or financial advisers to sort out the best plan for his or her needs.

Money can also be put into new US Treasury securities, recently paying 9 percent or higher. Nobody needs to be uneasy about either long-term government securities or short-term T-bills; they are still probably the best securities you can buy. T-bills come in 13-, 26-, and 52-week maturities and have been paying more than 9 percent.

Otherwise, investment opportunities can be classified as defensive or aggressive. As protection against uncertainties in your future, any program adopted in your strong earning years, usually from 40 to 65, should be balanced between ready availability of money for emergencies, safety of assets, and a capability for growth.

For ready availability, certificates of deposit and other plans are acceptable. For safety, insurance annuities come first, followed by US securities or stocks and bonds with great stability and a record of a good rate of return. Such defensive investments are as far as many want to go. Aggressive investments in the stock market and in business can be somewhat risky but could provide substantial means to increase reserves at a far greater rate through the years.