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Finding yourself broke and retired

By Barbara Whelehan ·
Friday, April 27, 2012
Posted: 5 pm ET

Do you worry about outliving your retirement savings? If so, you're in good company. Just more than half of Americans (56 percent) say they're financially prepared to live to age 75, and only 46 percent think they can make it to 85 on their savings, according to a new study from Northwestern Mutual. Fewer people (36 percent) say they have enough to get them to age 95.

It's hard to be optimistic about having enough money to last 30 years or longer. What a retirement planning feat that would be. That's about the same amount of time we spend toiling in the workforce.

But the prospect of facing poverty in the so-called golden years was made all too real this week with the release of a paper from the Employee Benefit Research Institute, a nonpartisan research organization. It found that poverty rates for older Americans rose between 2005 and 2009 -- and those over age 85 were most affected. In 2009, nearly 15 percent in that age group lived in poverty, and 6 percent were new entrants to this unfortunate predicament.

Individuals age 65 and older live in poverty if their annual income is lower than $10,458, according to 2010 statistics by the U.S. Census Bureau. Couples age 65 and older making less than $13,194 also qualify as poverty stricken.

The most susceptible

Single women, Hispanics and blacks are most vulnerable to becoming poor, according to the report; whites and married couples are generally better off.

The growing rate of poverty among older people can be attributed to a few things, according to Sudipto Banerjee of EBRI who authored the report. "As people age, personal savings and pension account balances are depleted, and as people age, their medical expenditures tend to increase," he notes in a press release.

The most disturbing fact, at least from my point of view: Poverty rates for women are about twice that of men in all the years surveyed. For instance, in 2005, 5.1 percent of men age 65 or above were in poverty versus 11 percent of women. And in 2009, the last year studied, 7 percent of men compared to 13 percent of women were indigent.

About 30 years ago, I attended a meeting at which two female financial advisers made a presentation about older women in poverty. Their central message: This will be you if you don't start saving for retirement right now. It really hit home.

And though I saved over the years, I don't feel confident I'll have enough to last 30 or more years. That's a long time. The insurance industry has a bevy of guaranteed retirement income products to sell worried Americans, including longevity insurance, which can be purchased for a lump sum at around 65 and then typically gives you an annual income beginning at age 85. It's a bit of a crap shoot. You're betting you'll live to a ripe old age to collect the benefit. If you don't live that long, well, the shareholders of the insurance company will benefit from higher profits.

At one time, I would have handily rejected getting it, but as I get older, I think it's something to consider. What do you think?


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June 18, 2012 at 9:48 am

"There is always something you can do to maximize what the market gives you"? This presumes that you have a presence in 'the market'. In order to have a presence in 'the market', one must be paid enough to have a surplus at the end of the pay period. Too many (and more every day) are living paycheck-to-paycheck (if they even have paychecks). Too many 401K's, IRA's, and other assets are being raided (with attendant penalties) to pay for little things like food, shelter, healthcare, and the kids tuition.

You're too many cases there's not a thing that one can do about it but live with it.

June 13, 2012 at 9:22 pm

I keep good drugs on standby for a drug overdose in case my savings don't see me through retirement, or if I just decide I want to check out. No one gets out of here alive anyway.

June 04, 2012 at 3:00 am

How much is enough?

There is always something you can do to maximize what the market gives you.

This is an unusual time.2008 was the first time in the great depression that "nothing" was safe! I find it less than amusing that America with it's $16 trillion in debt is considered a safe investment.The fact is that we cannot afford to pay the interest and depend on those who not long ago depended on us to remain solvent.

The fact that people are willing to accept less than 1.5% on a ten year treasury is nuts. They are locking in a guaranteed loss as inflation is running over 2% locking in a loss and potentially a disaster if the manipulated bond market is priced to reality and/or if those who buy our bonds demand more for the risk!

It is the case all over Europe and of course the really weak countries must offer 7%(except Greece).

If the worlds economy survives the cancer it has created then rates will surely go higher perhaps,much higher as China,Brazil,Australia and others are growing and will continue to grow quickly.

I am very uncomfortable so,I am about to refinance my mortgage out to 30 years. You say are you nuts? Au contraire. If you qualify you can borrow money at 3.5% to 3 3/4% get the motgage deduction,save on payments and hope that real estate will begin to rise in value over say the next 10 years!

I keep 50% of my assets in insured 1% money market accounts which is absurd but I will have access to dunds until this insanity ends.

I have the rest in bonds I bought maturing over the next 10 years getting significantly more than I could today although,it is always tempting to take the premium.

The rest is in MLP's selling under 20x earnings which move oil and gas,store the same which I believe will be a goosd place to be. The yields are tax advantaged and yield between 4.5% to 6.5% now and hopefully they will be able to continue these rates and more over time.

The rest is in stocks I belive in that seem very cheap to me and pay something while I wait.

That's after 40 years of investing experience and a lot of "agina". A very wise man taught me many years ago that it is always correct to bet against the end of the world! He was a specialist who lived through the Cuban Missle Crisis" and ended up owning too much. A specialist must make a market or go broke' He obviously made a lot of dough as the crisis ended and the market survived!

June 01, 2012 at 5:05 pm

Thumb nail estimate. If I work 30 years and live another 30 years before I die, I have to save at least 50% of every dollar I make. Too bad most people don't think that way.

May 30, 2012 at 9:36 pm

We may be broke, but we're still the only country in the world where the people on welfare are obese. So eat up, and be happy.

May 30, 2012 at 8:17 pm

Yea, but I see the US Government looting the retirment accounts just like Greece did, and Spain soon will. One is better off purchasing raw land and maybe a small rental home or property of some sort, I feel. Land can be purchased realativly inexpensivly right now. You could grow yr own food, and you would have a little income from yr rental home. Forget medical care. Don't even waste time worrying about it. The average American will not have access to mendical care anyway in four or five more years. Just let the body heal itself naturally, use natural herbs, or get medicine from the local vet supply house. Just accept the fact that every body is going to die sometime in the future to, and we willall either heal up or die. Forget traveling and running around out on the town. You should have done that when you were young and strong enough to live it up. Now you can just roll around the shack and sit at your fishing pond, like many of the old timers did when I was growing up. Most did not ever have access to medical care either. Many lived to be 90yrs old or more.

May 28, 2012 at 11:37 am

I too, have benefited from relatives who died, but I wonder if the succeeding generations will be as lucky. I invested my money conservatively on the stock market, but with two severe downturns, my money has not increased in dollars, and considering inflation, I am worth slightly less. Where do they get those graphs that show such gains?

April 28, 2012 at 11:36 am

oops, I got published, thought I was sending in a letter.

April 28, 2012 at 11:35 am

I'd have to look into it more, but I'm thinking that longevity insurance thing might be a good idea. I suspect the purchase price is higher than I can comfortably afford though. Many of my grandparents and blood related aunts and uncles have lived well into their late 90s so it is something to think about.

I would have very little saved for retirement (I am 64) but I have had several amazing windfalls in the form of small inheritances from elderly relatives who have died, inheritances I never even suspected. The first one was only $1,000 but I could never bring myself to spend it because of who it came from. The second one came from my grandparents, $25,000, and that blew me away. A year ago an elderly aunt with no children of her own split her estate between us five neices and nephews, putting $33,000 in my retirement account. My grandmother's estate was split six ways, the bulk of the estate going to my mother and her brother, the rest to the grandchildren.

That generation knew how to save, and they had enough money to save. I might get as much as $50,000 from my mother (she is 92 and still living at home), but I expect her money to take care of her first before I even think further about it.

The most truly amazing money in my future comes from my daughter's husband's father. He knew how to save and invest money to take care of his wife should he die first, and after he died, my son-in-law, an only child, gathered up all his investments from various places and found his father had an estate of $5,000,000. Mother never even knew there was that much. Mother's care in assisted living is covered for the rest of her life, and my daughter and her husband already have half of the $5,000,000. I don't ever expect to see any of that money personally, but my daughter has assured her father and I not to worry, that we will be taken care of for the rest of our lives. The estate continues to grow under my son-in-law's stewardship, and I don't doubt that my husband and I will benefit from this estate enough to save us from certain poverty. I don't expect to get rich off my son-in-law's money, but it's nice to know we'll be at least a few steps ahead of poverty. We are as much family to my son-in-law as his own mother.

I didn't know fairy tales became true so late in life. I am so impressed with family members of the past generation, The Greatest Generation, that they have been able to save and hang on to such large amounts of money.

I would be sick and tied in knots over our future without the generosity of our elders. The all lived humble lives rather than spend the money they had becasue they expected to need it for their "old age" and here I am benefiting from that.

In the meantime I am still working and plan to work at least until I'm 66 and maybe a year after that.

I wouldn't mind of you published something about my story in an article comparing the past generation with mine, but please heavily camoflage the details and the dollar amounts.