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Golden years fade into the horizon

The report states that for many Americans retirement has been pushed back. 43% of overall respondents said they believe they now face more years in the work force compared to a year ago. 36% of affluent Americans and 31% of those 50 or older expect a longer career.

Half of affluent respondents said they planned to "pursue a more cost-effective lifestyle," Bank of America said.

An unclear future

The bleak situation in many Americans' finances is compounded by future plans that are hazy, the survey found. Most - 59% of the general public and 52% of affluent individuals - don't know or don't have a good idea of what they'll need to save to maintain their current standard of living, the report said.

Four in 10 Americans do not plan to change the way they save or invest for retirement in 2009, though 16% of the general population reported that they may not save anything for retirement in the coming year, the report said.

Almost half (44%) of the general population and close to two-thirds (61%) of affluent Americans are putting their investment dollars into savings accounts, where cash can be accessed easily, the survey said.

NEW YORK (CNNMoney.com) -- As the economic crisis continues to hammer Americans, many are turning to desperate measures by dipping into their retirement funds to make ends meet, according to a survey released Thursday.

The 2008 Bank of America (BAC, Fortune 500) Retirement Savings Survey revealed that current financial conditions forced 18% of respondents to withdraw from their retirement accounts prematurely.

Accessing their retirement funds "should be at the bottom of the list," said Craig Averill, personal retirement solutions executive at Bank of America."They need to be cognizant of what this decision means."

The top three reasons for the early withdrawals include: credit card debt (25%); mortgage payments (22%); and recent job loss (22%), according to Bank of America.

Findings revealed 62% of the general public and 44% of affluent respondents are either behind schedule or have not started retirement planning - compared to 53% and 36%, respectively, in a March survey.

The March survey was the first conducted by the bank. The current survey was the first time it asked respondents about premature withdrawals due to the poor economic conditions.

Still despite the dramatic upheaval in the U.S. economy, Bank of America said, 68% said they haven't changed the way they save, invest, or manage retirement assets in the last three months.

"In today's economy, people are bombarded with messages that create a great deal of anxiety," Averill said. "It puts them in a position of indecision. They're concerned about making the wrong choice, so they do nothing."

The "most significant roadblock" most people face is being unable to save earlier for retirement, the report said, with 52% of the general population and 48% of the affluent responding as such.

"What the survey says on the whole is, people need to go back to basics," Averill said. "Remember the fundamentals. It can be painful sometimes to do a cash flow statement, but it's necessary. Focus not just on today, but the reasons you put a retirement plan together. "

401k Investing

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NEW YORK (Reuters) - Workers are increasingly cautious about investing in corporate retirement funds, having shifted money out of stocks, reduced how much they contribute and, in some cases, stopped contributions altogether or withdrawn money, according to a study released on Monday.

The study by Hewitt Associates, which administers 401(k) plans for corporations, found the average U.S. 401(k) plan balance was down 14 percent through October to $68,000 from $79,000 in 2007.

401(k) refers to a section of the U.S. Tax Code that allows retirement plan investors to defer paying taxes.

Hewitt, a human resources consulting and outsourcing firm, found 4 percent of workers had stopped contributing to their plans in response to the declines on Wall Street, and fewer are investing in stocks.

Many people moved money into safer assets after particularly bad days in the stock market, said Pamela Hess, Hewitt's director of retirement research.

"I see people that are very unsophisticated moving to cash, but I also see people who believe themselves to be sophisticated trying to time the market," she said. "If you get out just after it goes down, those people are guaranteeing they don't get the upside."

Stock holdings now account for 53.8 percent of assets, down more than 14 percentage points from a year ago. The decline reflects both the changes in allocation and the lower value of stock holdings.

Hewitt's analysis included 2.7 million U.S. employees and data collected through October.

INCREASED TRADING

"We're certainly seeing higher trading activity as people got their statements in the mail. The bad news is kind of sinking in," Hess said.

So far in November, balance transfers from equities are up further, with the money transferred to bond and stable value funds, as well as balanced funds, which mix equities, bonds and other assets with an eye toward preserving capital.

About 71 to 72 percent of eligible U.S. workers contribute to 401(k) plans, down about 2 points since the start of the year, according to Hewitt. On average, they set aside 7.8 percent of their pretax earnings for retirement investments, down slightly from 8 percent in 2007.

"I was surprised that number didn't go down more," Hess said.

More employers have put in incentives to invest, such as increasing their match, and some workers -- tempted by lower prices -- have increased contributions, she said. However, the proportion of new money dedicated to stocks is at an all-time low, at 58 percent.

Some employees, especially in economically sensitive sectors like retail, have stopped contributing altogether. Also, since the credit crunch has made borrowing more difficult, more employees are also tapping 401(k)s for cash.

Overall, 6 percent of employees pulled money out, up from 5.4 percent a year ago. So-called hardship withdrawals, in which workers have to meet certain criteria but are still liable for penalties and additional taxes, are up 16 percent. Loans, which often come with low interest rates, are a better option, Hess said.

One factor to watch in coming months, according to Hewitt: More employers may need to reduce their 401(k) matches to conserve cash. In 2002, about 5 percent of companies cut back their matching contributions.

Whether current trends continue depends on the stock market's performance, Hess said.

"Some of the opt-outs could accelerate, the trading activity could accelerate, if markets keep going down. It's starting to scare people that it could be more than just the little dip that we saw back when the tech bubble burst."

(Reporting by Nick Zieminski; Editing by Lisa Von Ahn, Brian Moss, Dave Zimmerman)