Many of Us Likely to Outlive Savings
Nearly three out of five middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles, a new study from Ernst & Young has concluded.
The study, set to be released Monday, finds that Americans will have to drastically reduce their standard of living before retirement to live comfortably, or even avoid destitution, later in life.
Middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize their chances of outliving their financial assets, the study found. Workers seven years from retirement will have to cut their spending by even more — 37 percent.
"People are going to have to adapt in a number of ways that they weren't anticipating or hoping for," said Tom Neubig, national director of the Quantitative Economics and Statistics practice at Ernst & Young. "I think a lot of people are hoping to maintain roughly the same standard of living after retirement. Our study suggests they are going to have to make some changes."
And cutting back on spending is no small feat at a time when inflation and the cost of living are rising. Fluctuating investment returns on 401(k)-style plans in this wobbly stock market are not helping matters."
Most people, if they look at their life expectancy and they think they will live to 90, they are nuts to retire at 60. They're going to be living in poverty at 80," said Peter Morici, an economist at the University of Maryland.. "I think it's a wake-up call to baby boomers to get serious about getting their houses in order."
If a married couple is making $75,000 at retirement and relies solely on Social Security, they have a 90 percent chance of running out of money if they maintain their pre-retirement lifestyle. The addition of income aside from Social Security drops the couple's chance to 31 percent.
Sunday, July 13, 2008 - Page updated at 12:00 a.m.
By Nancy Trejos
The Washington Post
http://seattletimes.nwsource.com/text/2008048859_retirees13.html
