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Are you ready for retirement?
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The assumptions
The study assumes a retirement age of 65 and that retirees will wring out the value from all their assets to make ends meet during retirement. For example, financial assets such as 401(k)s and IRAs will be used to purchase inflation-indexed annuities (which "are neither readily available nor popular with consumers," the study's authors concede, but "they provide a convenient tool for converting a lump sum of wealth into a stream of income"). Also, the study assumes that Americans will take out reverse mortgages on their homes to help pay for their expenses.

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Those assumptions run counter to actual events in American households. In fact, many Americans retire earlier than age 65 due to circumstances beyond their control. Many don't buy annuities, and most don't take out reverse mortgages. That may very well change. Today's retirees are "living in a 'golden age' that will fade as baby boomers and Generation Xers reach traditional retirement ages in the coming decades," say the study's authors.

The implication: We might be forced to drain our assets if we don't proactively change our retirement or savings patterns now.

Changes for the better
Here's how we can tweak ourselves into a more secure retirement, according to the study: Increase our savings rates by 3 percentage points from an early age.

OK, that's not a pat solution that applies to every individual; it's a statistic that, broadly applied, improves the numbers in a study. For one thing, the right number for you would depend on what you've been saving all along. If you've been diverting 5 percent of your income into a retirement plan, you'd have to bump it up by more than 3 percentage points. If you've been saving 20 percent, you probably don't need to do anything.

For another thing, some of us are too old to implement this strategy successfully. We don't have a time machine that would enable us to go back and increase our savings by 3 points from an early age. But we can increase our savings rates beginning now -- or at least before we approach that impending retirement deadline.

The study suggests another option: Put off that deadline until age 67. Our retirement prospects would improve immensely if we could continue to add to our retirement savings an extra two years. Statistically speaking, the 43 percent of Americans at risk of having inadequate savings would drop to 32 percent if retirement were postponed to age 67.

Next: "We can choose to spend less and save more now. ..."
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