When the subject of saving for retirement comes up, it brings a little smirk to many people’s lips. After all, with the economy in a nose dive, and the pundits scratching their heads, trying to figure when this mess will go away, why would anybody worry about finding money to stash away for that far off life event known as retirement? It’s difficult enough getting through each pay period trying to make ends meet; why look for another place to put money you don’t have? Besides, everyone knows nobody really retires anymore; you just change where you work.

It seems Americans are pretty unsophisticated when it comes to understanding how to plan for retirement. Just ask Bill Losey, CFP®, CSA, America’s Retirement Strategist®, and the resident retirement expert on CNBC’s On the Money. He has been named one of America’s Top Financial Planners and is the author of Retire in a Weekend! The Baby Boomer’s Guide to Making Work Optional (Love Your Life Pub, January 2008).  Here’s what he had to say when asked, “How savvy are Americans when it comes to knowing how much they need to save to maintain their standard of living in retirement?”

“Americans are not savvy, in fact, many are financially illiterate. Americans have been fooled to believe that there is some magic number that exists that once they have accumulated the number, they’ll be able to retire. On the contrary, most Americans retire when they hit some self-imposed number (250k, 500k, 1 million, etc.), they reach a certain age (55,59,60, 62, and 65), or there is some sort of triggering event such as a layoff, family medical issue, or a spouse retires.”

That being said, Americans have gotten some kind of wake up call, at least according to Bank of America’s 2008 Retirement Savings Survey. Reportedly Americans are spending less than they did, but they’re also saving less, too. Where’s the money going?

Bill says that Americans are using the money they are saving to straighten out their own personal balance sheets and to eliminate the excesses from the past. They’re paying down their debts because they’ve been hit in the head with the realization that they’re over extended. In fact, last month was the first month on record where Americans’ personal debt levels actually decreased.

So while Americans are busy trying to get their acts together in terms of personal debt, is it still possible to pull money out of their budgets to save for retirement, even if it may seem that they’re already stretched to the max? Yes, says Bill; here’s why:

“For most people an honest look at your monthly expenses will usually illustrate at least a few hundred dollars in money being wasted on things you don’t really need. It is not uncommon for people to be able to redirect $100-$500 per month to savings after a careful review of their expenditures. The problem is most people were just spending unconsciously. When they consciously track and monitor where they are spending, they will become better savers. Whether it is in a 401(k), or an IRA, the savings process should be automated through payroll deduction or automatic monthly investments deducted from your checking/savings account.”

While we’re on the subject of 401(k), it was inevitable to ask Bill if they’re still a good deal now that so many companies have stopped making matching contributions. He responded that in spite of companies decreasing or eliminating the company match temporarily, Americans should still try to max out their contributions each year because the reality is that their companies aren’t going to take care of them with traditional defined benefit pension plans, and the government isn’t doing much better despite Social Security. Americans will be forced to save more of their own money or suffer the consequences of working past traditional retirement age.

But what about the argument that everybody’s 401(k) took a huge hit when the bottom fell out of the mortgage market? Doesn’t that mean Americans should stop pouring water into a sinking ship? Absolutely not, says Bill:

“Despite the losses, we are beginning to see a recovery. Now is the best time in years to be contributing because most bonds and stocks have lost 10-60 percent of their value. Every company in America is on sale. People will kick themselves in five to ten years for not investing in this potential once in a lifetime economic crisis.”

After spending all of this time preparing, are Americans going to find retirement is just a myth? Yes and no, says Bill:

“Traditional retirement will be a myth for a large portion of our population, but Americans who have saved diligently, planned, and strategized will be able to achieve their goals. On the other hand, those who have made luck and guesswork the foundation of their retirement security, will most likely have to work longer, save more, or make drastic personal downsizing decisions to retire on smaller portfolios.”

There is retirement out there, but you’re going to have to work for it. Like all good things, in the end you can look back and say it was worth the trouble.