Published: Sunday, July 25, 2010
Boomer retirement: Save more and reduce your standard of living now
BOSTON -- If you're a baby boomer, the odds are high you'll exhaust your retirement savings after 10 or 20 years of retirement, according to the latest Retirement Readiness Rating report released last week by the Employee Benefit Research Institute.
Nearly half of older boomers -- those now aged 56 to 62 -- and some 44 percent of younger boomers -- aged 46 to 55 now -- are at risk of not having sufficient income to pay for basic retirement expenses and uninsured medical expenses, according to the study.
The study, which assumed boomers would retire at 65, also found lower-income retirees are most likely to run out of money after 10 and certainly 20 years of retirement, and higher-income retirees are least likely to run out of money.
So, what to make of this study?
In reality, most Americans don't run out of money; they run out of lifestyle. As they age and spend down their assets, they typically reduce their living standard.
"For the most part, people do not completely run out of money when our software says they will," said Stephen L. Deschenes, senior vice president and GM for the annuities division of Sun Life Financial's U.S. operation.
"They do not run full-speed like Wile E. Coyote off the cliff and only then realize that they are out of terra firma. Rather, they take action either to spend less or work more or some combination to forestall running out," he said.
Other research finds a high likelihood that Americans will be forced to spend less. After factoring in health-care and long-term-care costs, the National Retirement Risk Index, produced by Boston College's Center for Retirement Research, finds that some 65 percent of American households are at risk of not having enough money to maintain their living standard in retirement, according to the index.
A point to consider: The study assumes boomers will retire at age 65. That's not likely to happen.
According to Sun Life Financial's Unretirement Index, the portion of Americans who plan to work past age 67 is higher than ever: a record 55 percent, including 28 percent who plan to work full-time past age 67.
The bottom line from all these studies: Saving more and reducing your standard of living now might be the only way to be reasonably certain you'll enjoy any standard of living later.
On the web
Retirement Readiness Rating report, from Employee Benefit Research Institute: www.ebri.org/
National Retirement Risk Index, produced by Boston College's Center for Retirement Research: crr.bc.edu/special_projects/national_retir ement_risk_index.html
Unretirement Index, produced by Sun Life Financial: www.sunlife.com/us/v/index.jsp?vgnextoid=297ea84faec24210VgnVCM1 00000abd2d09fRCRD
Nearly half of older boomers -- those now aged 56 to 62 -- and some 44 percent of younger boomers -- aged 46 to 55 now -- are at risk of not having sufficient income to pay for basic retirement expenses and uninsured medical expenses, according to the study.
The study, which assumed boomers would retire at 65, also found lower-income retirees are most likely to run out of money after 10 and certainly 20 years of retirement, and higher-income retirees are least likely to run out of money.
So, what to make of this study?
In reality, most Americans don't run out of money; they run out of lifestyle. As they age and spend down their assets, they typically reduce their living standard.
"For the most part, people do not completely run out of money when our software says they will," said Stephen L. Deschenes, senior vice president and GM for the annuities division of Sun Life Financial's U.S. operation.
"They do not run full-speed like Wile E. Coyote off the cliff and only then realize that they are out of terra firma. Rather, they take action either to spend less or work more or some combination to forestall running out," he said.
Other research finds a high likelihood that Americans will be forced to spend less. After factoring in health-care and long-term-care costs, the National Retirement Risk Index, produced by Boston College's Center for Retirement Research, finds that some 65 percent of American households are at risk of not having enough money to maintain their living standard in retirement, according to the index.
A point to consider: The study assumes boomers will retire at age 65. That's not likely to happen.
According to Sun Life Financial's Unretirement Index, the portion of Americans who plan to work past age 67 is higher than ever: a record 55 percent, including 28 percent who plan to work full-time past age 67.
The bottom line from all these studies: Saving more and reducing your standard of living now might be the only way to be reasonably certain you'll enjoy any standard of living later.
On the web
Retirement Readiness Rating report, from Employee Benefit Research Institute: www.ebri.org/
National Retirement Risk Index, produced by Boston College's Center for Retirement Research: crr.bc.edu/special_projects/national_retir ement_risk_index.html
Unretirement Index, produced by Sun Life Financial: www.sunlife.com/us/v/index.jsp?vgnextoid=297ea84faec24210VgnVCM1 00000abd2d09fRCRD
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