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Moving into retirement

Survey finds more leaving jobs earlier -- and not saving enough

Nearly a quarter of workers retire early because of health problems, according to a survey released by Fidelity Investments yesterday, a finding likely to fuel a growing debate over how much Americans need to save for their retirement years.

The report, conducted by a new research institute of the Boston mutual fund giant, also found the average working family today saves enough to replace 58 percent of its income in retirement, combined with Social Security and pension payments. That is far below the roughly 80 percent figure that is commonly suggested by Fidelity, other large mutual fund companies, and many financial planners.

Taken together, the figures paint a troubling outlook, said Guy L. Patton, the Fidelity institute's executive director. Though many people figure to keep working beyond age 65 to save more for retirement, many won't make it to their targets because of health problems. "The additional pressure because of health issues only makes that 58 percent even more of a problem," Patton said.

Exactly how much workers should save for retirement has become a hot debate in recent months. Some analysts argue that companies like Fidelity have an interest in persuading individuals to save more than they have to, in order to draw in more money to manage.

"As a whole, the industry is soliciting risk," said Boston University economist Laurence J. Kotlikoff, who questions whether the investment industry has put too much emphasis on promoting the 80 percent level. Individuals' needs can vary so widely as to make the figure meaningless, Kotlikoff said, citing factors such as whether a couple has children or faces mortgage payments in retirement. (Patton says Fidelity's planning tools help individuals arrive at a personalized rate.)

Jean Setzfand , director of financial security for AARP, formerly the American Association of Retired Persons, said Fidelity's research finds some alarming signs of the obstacles many people cite as reasons not to save, no matter what target is appropriate. For instance, Fidelity found 58 percent of working respondents hadn't taken basic steps to review or improve their retirement outlook in the past six months. Of these people, 60 percent said they had too little money left over after paying basic living expenses or credit cards, Fidelity found. "These are people who are working now, and having problems making ends meet," Setzfand said.

Fidelity said researchers surveyed more than 2,000 Americans who work full time, are 25 years old or older, and earn $20,000 or more a year, plus 793 retirees ages 55 and up.

Specifically, the survey found "Generation X" workers, those ages 25 to 42, are on track to replace 54 percent of their pre retirement income; that baby boomers, ages 43 to 61, are on track to replace 62 percent of their pre retirement income; and that "pre retirees," ages 55 or older, are on track to replace 61 percent of their pre retirement income.

Some sense of pessimism does seem to be filtering through to the respondents: 77 percent of workers think they aren't saving enough for retirement, down from 83 percent a year ago. Another finding was that many Gen Xers felt sandwiched between supporting their parents and saving for their children's education.

The survey did find some signs of progress. In 2005, for instance, the survey found households had saved enough to replace just 56 percent of their income, 2 percentage points less than this year. But Patton said much of the increase is due to rising stock markets rather than basic improvements in saving habits.

"It's good news, but it's not really being driven by the fact that people are saving more," Patton said.

Ross Kerber can be reached at kerber@globe.com.

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