Fidelity says pensions in good shape as replacement ratio rises to 58% -- Say What? (Bill Chirolas)

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William Chirolas -- World News Trust

March 14, 2007 -- Fidelity Research Institute announced back in early February the findings of its 2007 Retirement Index. The median working American household is on track to replace 58 percent of their income ($62,000) in retirement -- up from last years 57 percent.

Fidelity reaches this conclusion based on the median working Americans having $22,500 in total household retirement savings, and anticipating they'll receive $29,500 in annual Social Security payments, with more than half (51 percent) expecting to receive a pension, with median benefits of $18,000 annually. The Fidelity Survey does say that just more than half (51 percent) of households expect to receive a median annual pension benefit of $18,000 -- but why do they expect this? The folks turning 60 this year have savings that now exceed the $100,000 mark (at $112,000) in average account balance in an IRA/401K.

But why do folks expect to get a defined benefit pension from their place of work that will replace 20 percent of their pre-retirement income after working in what is most likely a non-union company and after having voted into office Republicans that pass laws that keep labor unions weak?

And if they keep voting Republicans into office I am not sure that one-third of their post retirement income can be expected to come from Social Security. Defined contribution plans (401k. IRA, profit sharing) plus personal savings may well provide that 10-20 percent of pre-retirement income that most expect -- if the market holds up. By the way, for those asking how did the median income get as high as $62,000, that is the median projected income at retirement of the 2,000 folks in the sample -- it is not the average of their current incomes.

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