March 18, 2011 -- How are Americans feeling about retirement? In a word, grim.

That's the finding of a new survey just released by the Employee Benefit Research Institute, which asked 1,258 respondents how confident they felt that they'd be able to afford a comfortable retirement.

Their pessimism set a new record for the 21-year old annual survey.

Twenty seven percent declared themselves "not at all confident" they'd be able to retire comfortably, up from 22 percent the year before. Only 13 percent said they were "very confident" of being able to.

Jack VanDerhei, research director at EBRI, says what surprised him most--in light of the stock market's rebound in 2010--was the 5 percent increase in "not at all confident" responses. The increase was not uniform but varied according to income.

The increase in the total percentage of workers not at all confident appears to be largely the result of a loss of confidence among those who have less than $100,000 in savings, the report found. That percentage increased sharply among people with savings of less than $25,000 (43 percent in 2011, up from 19 percent in 2007) and between $25,000 and $99,000 (22 percent in 2011, up from 7 percent in 2007).

Worker confidence appeared to be holding steady in the following areas: having enough money to pay for basic expenses during retirement; having enough to cover medical expenses; having enough to afford long-term care. How could people feel comfortable about these components of retirement and yet be so pessimistic about retirement overall? Easy, says VanDerhei: They don't want to have to settle for the basics. "They say, 'I want the golden years I've see in all the advertisements.'"

How are today's would-be retirees hoping to achieve that goal? By working longer and by changing the way their money is invested.

Nicole Francis, a certified financial planner in New York City with 26 years experience, says of clients in their 60s: "They've really reassessed their attitude toward risk since the meltdown of a few years ago. They're reassessing their risk even if they're not planning on retiring." She's seeing her clients put more money into fixed income investments, "even among people who up to this point have invested in stocks." What they want isn't a killing in the market; it's a safe and steady stream of income, even at the cost of a lower return.

One of her clients, Eileen (who prefers that her last name not be used), is well into her 60s. She likes her job as an administrative assistant for a private school and intends to keep working as long as she can. "It may come to a point," she says, "where I'm physically unable to keep working---but I'm nowhere near that now."

The volatility of the real estate market has forced her to rethink retirement. "I always saw my weekend country home as a way out," she says. "I could sell it when I had to. Unfortunately, its value has significantly depreciated in recent years. People aren't buying second homes." She's been moving money into bonds, out of stocks. She's also paid off debt, which she figures gives her a better return on her money than if the same funds were in a bank earning 1 percent.

George Sanchez, 64, is looking to retire at the end of August. The college director of library services says even after retirement he expects to be working part time and looks forward to it. "My retirement won't be bad," he says. "But it won't be as good as what people had 30 years ago. When my parents retired, they just retired." He says it's been a "real struggle" to make sure he'll have enough money. Inflation worries him. "The maintenance fees on my apartment keep going up."

He's moved a chunk of his savings into an annuity but has left 50 percent in blue chip stocks, which he considers a safe investment. "If General Mills goes out of business," he says, "we all go out of business." Despite continuing to work in retirement, he expects he'll have to cut back on his spending. He's been used to taking four or five nice vacations a year, some to Europe and the Caribbean. He'll have to cut back to just one, he thinks, after he retires.

VanDerhei sees evidence that persons who up until now have successfully put off thinking about retirement are finally being forced to confront reality. That's one reason for the sudden rise in pessimism. Previous EBRI surveys, he says, had revealed "a ton of false optimism. People in their 30s, 40s and even 50s with nothing saved still were saying they expected to have saved enough to reitre. Now those individuals are finally calculating that they need greatly more than what they have. Cold harsh reality is starting to set in." Their shock hasn't yet translated into increased savings, but VanDerhei views shock itself as progress: "They now know enough to be afraid."

EBRI's findings match those of a 2010 survey by MFS Investment Management, which found 4 4percent of non-retired investors had no idea how much money they will need in order to retire comfortably.

VanHerhei cautions against people thinking they can solve their retirement ills just by working longer. "That's certainly feasible for some," he says. "But 40 percent of our respondents said they had to retire earlier than they'd planned—either for reasons of health (their own or their spouse's) or because they could not find the right job." Better that people "bite the bullet now and start saving more. If you start saving more today, you have complete certainty. To delay the pain is a very unwise decision."