Altogether, baby boomers may be leaving at the worst time in a generation or more.
"It'll cost more to retire," says David Blanchett, head of retirement research for Morningstar Investment Management. And "there are certainly more risks facing retirees today than there were for past generations."
Previous generations, for instance, could rely on defined benefit plans, or pensions. Pension plans, which provide a fixed monthly income for life, regardless of what's happening on Wall Street, have been vanishing as employers shift the investment risk associated with retirement to their employees.
And, right now, those risks aren't paying off.
Market data analyzed by Research Affiliates at the request of Bankrate show that typical stock-and-bond investments probably won't support retiring baby boomers like they did 30 years ago.
For example, someone who retired in 1980 with $355,000 in a portfolio of 60 percent stocks and 40 percent bonds would have received an average annual return of 6.9 percent over 30 years. That person could have withdrawn 4 percent every year and the portfolio would still have grown to $1.3 million by 2010, according to Research Affiliates.
A retiree in 2013 may not have that kind of luck. Yields have dropped to around 2 percent for stocks and 10-year Treasury notes. And while yields certainly could rebound in the future, they might not rise fast enough to save those who are retiring right now.
Research Affiliates, which uses current market yields to estimate future returns, projects that someone retiring today with a similar 60-40 portfolio would run out of money in 25 years. It could be depleted even faster if inflation and interest rates rise as they did from the 1960s to the early 1980s.
Returns on annuities also have taken a tumble lately, thanks to lower interest rates.
In 1990, for example, an annuity that guaranteed a lifetime income stream for a 65-year-old man required an investment of about $9 for every $1 it paid back, according to Blanchett. Twenty years later, a similar 65-year-old would need to invest $15 to get $1 in guaranteed annual income. And that $1 has only about half the buying power after 20 years of inflation.
Dividend and bond yields have remained so stubbornly low this year, in fact, that financial planners have started to throw out historical assumptions about what someone can safely withdraw in retirement. Until recently, a 4 percent annual withdrawal strategy was considered safe; retirees could withdraw $40,000 a year from a portfolio worth $1 million, for example. But this has been called into question, and the shift is sending chills across the country.
If you want your savings to last, planners are saying, you may need to take out less from your portfolio than you'd planned.
"A lot of retirees will have significant shocks to their lifestyles when they retire, or sometime after that, because of this savings crisis and funding crisis," Blanchett says.
Besides adjusting to life without a paycheck, boomers also will need to figure out how to pay for higher health care costs while Congress cuts into Medicare. Even the best-laid retirement plans could be dismantled by a sudden hospitalization or an extended stint in a nursing home, says Jack VanDerhei, research director at the Employee Benefit Research Institute.