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Retirement is still risky

By Jennie L. Phipps ·
Tuesday, December 3, 2013
Posted: 3 pm ET

Despite a 45 percent increase in the stock market since 2010 and a 6 percent increase in housing values during the same period (in inflation-adjusted terms), about 50 percent of people older than 65 are still likely to be unable to maintain their standard of living in retirement, according to a study by the Center for Retirement Research at Boston College.

The center's calculation, known as the National Retirement Risk Index, is based on the Federal Reserve's Survey of Consumer Finance, a triennial survey of U.S. households. The most recent survey is 2010. The 2013 survey isn't available yet.

In 2010, the index showed that even if households headed by 65-year-olds annuitized all their income and took out reverse mortgages in an effort to maximize their resources, 53 percent of households were at risk. Given the improvement in housing values and stock portfolios, it would seem like the state of retirement planning would be significantly better in 2013. But the retirement picture improves only by 3 percentage points, so that 50 percent of households are at risk instead of 53 percent, the center found.

The explanation is simple, says Anthony Webb, a research economist for the center.

  • About 89 percent of all stocks are owned by people in the top third of the income spectrum, so average people didn't benefit from the rising stock market.
  • Social Security's full retirement age has risen for an increasing number of people compared to 2010, effectively lowering benefits. In other words, the further from full retirement age you are when you claim, the less you get.
  • Interest rates continue to be low, and that has an impact on how much income households can squeeze out of savings as well as the amount of money available from annuitization and from reverse mortgages.
  • Home values are much more significant for lower-income retirees than they are for wealthier older people, and even though they've risen 6 percent since 2010, that doesn't make up for the Great Recession's hefty decline.
  • People are living longer, so they'll need more total income to pay for that increased longevity.

What is the answer? Webb says most people have three choices. They can work longer, save more or accept a drop in their standard of living after they retire.

"The trouble is that some households don't have much choice. If they are in poor health or lose their jobs, these households may have unpalatable choices," Webb says.

"If you have a job and you are in good health,  there is a lot to be said for working longer," he adds.

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December 05, 2013 at 10:26 am

Just retired 1 1/2 years ago; worked my whole life and saved and invested. I planned to retire only if I had no debt:) Am blessed with good health and never gave one penny to the credit card companies. I believe that if you plan ahead and don't spend money like water you should be ok. Am fortunate to have both pension and SS. Mortgage is paid up and $$$$ invested---it is a good feeling----use common sense and you can do it too!

December 05, 2013 at 8:13 am

If you don't have the money when you retire to maintain your current lifestyle then adjust to the income you have and sell your nice big house, which you don't need since your kids have grown up and moved out, and buy a condo. They are far less expensive and with the profit you should make from selling your house, and you big car, and your toys, you could buy the condo cash and perhaps have enough money left over to pay off any loans you may have. I retired at the age of 52 and that's what I did and I have plenty of money and I live in a very nice condo in Fort Lauderdale, Florida. I'm currently 63 with a pension and I'm getting Social Security. Don't believe all of this garbage from people that are telling you that you have to work until you die or wait until you are 100 before collecting Social Security. That's just big business and the government hoping you will die before you can collect anything.

Hearing Spec
December 05, 2013 at 8:09 am

KT: Do you know any companies hiring 59 year old trainees? Do they have a benefits package?

Yes, I do know of one. Hearing instrument specialists is a field where us boomers can prosper.

December 05, 2013 at 8:04 am

The so called president is to blame with all the things he's been pulling. From bail outs to the affordable care act, causing the elderly to work longer. Now the younger people can't work because those jobs are filled by the elderly. Lose lose proposition. And before I wasn't a Obama hater, the house of reps are to blame too.

December 05, 2013 at 7:12 am

This should be a lesson for younger generations. Plan for retirement. Save/invest for retirement, be consistent, take advantage of any employer matching plan, max out contributions when possible and try to develop multiple streams of income for retirement. And use the information about this that is available on the web, most is free. I use several site including the site Retirement And Good Living that provides information on finances, health, retirement locations, part time work and also has a great blog of guest posts from around the globe about a variety of retirement topics.

December 05, 2013 at 7:04 am

Do you know any companies hiring 59 year old trainees? Do they have a benefits package? Yep America is certainly on the right track.

December 05, 2013 at 7:00 am

It seems that the gloating fools that have secured retirement plans are doing all the talking everyone beneath them. Take away the free ride that they think they are privy to and they will instantly become the biggest criers. When the public funding and monopoly mecca that supports this legal thievery comes to an end what are these bigmouth boneheads going to rely on?

December 05, 2013 at 1:29 am

Good Evening,
Please what type of education or jobs to you advise people over 55 years of age to go for to avoid being jobless or homeless?
The best short term career path.

David Therkelsen
December 04, 2013 at 11:48 pm

Don't do the math, do the psychology.
Yes, if all that money had been invested over all those years, you'd get a lot more. But you wouldn't have made those investments, nor would you have had access to your employer's portion of the investment.
Or perhaps I am wrong about that. Perhaps you would have made the investments, and even your employer's portion (because in theory your employer could have paid you in salary what it otherwise paid into SSA).
But if you would have done this, you would have been in a small minority. Most would not have.
SSA has to be part of the mix.

Michael Miller
December 04, 2013 at 10:22 pm

Approximately 50% of the U.S. population over the age of 62 will end up "homeless" in 10 years. Just do the math.
Social Security, as a means of old-age financial survival is a joke. The SSA actively promotes waiting until age 70 to collect SSA benefits, in order for the beneficiary to collect a larger monthly benefit. They are trying to delay the collection of benefits by "Boomers", because if all the "Boomers" start collecting benefits at 62, the system will go broke. And if you wait until age 70 to collect benefits, you have to live to age 84 before the late acceptance of benefits pays off.
I will start collecting SSA benefits is January 2013, and the amount I will receive will cover my property taxes, and utilities, some basic living expenses. I will receive $1,572 per month, not enough. I paid into Social Security, and my employers did too, in the 1960's, 1970's, 1980's, 1990's, 2000's, 2010's. If all that money had gone into regualar bank savings accounts, earning regular bank interest rates, I could draw twice the amount SSA will pay me, and not diminish the principal, indefinitely. Just do the math.