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Will you run out of money?

By Jennie L. Phipps ·
Wednesday, March 2, 2011
Posted: 4 pm ET

How do you view the risk of running out of money in retirement?

The Society of Actuaries examined data about the incomes and savings of people  between the ages of 45 and 80 and concluded that a third of them will retire with little more than their Social Security benefits. Another  third will have some additional income for discretionary spending. Only the top third will have enough money to support a comfortable retirement.

With those numbers in mind, the actuaries commissioned a survey about financial risk in retirement. The survey concluded that many people give lip service to the notion that they ought to be putting contingency plans in place so they'll have enough money to keep roofs over their heads, food on their tables and cash in their bank accounts for health care -- but they aren't actually doing much about it.

After looking at pages and pages of this kind of discouraging data, the actuaries concluded that people approaching retirement or in the early years of it would be much better off if they took some key retirement planning steps:

  • Think hard about the timing of retirement. Many people who participated in focus groups related to this survey said that they were choosing to retire at the same age their parents did. But baby boomers often don't have the same resources. They don't have pensions or nearly as much savings as the generation that grew up during the Great Depression. And it's likely they'll live longer. Delaying retirement long enough to maximize Social Security and shorten the time that you'll have to depend on savings could make retirement much more secure.
  • Plan to work later in life. About 30 percent of re-retirees say that they'll never be able to afford to retire. If you are in that category or if your retirement income looks skimpy, keep your skills up to date, network and explore self-employment options.
  • Consider inflation. While Social Security is indexed for inflation, pensions and annuities usually aren't. With inflation at 3 percent, the cost of things will double in 25 years. Consider what you'll do to get by when that happens.
  • Have a plan for your house. Even after the real estate meltdown, most people's largest asset is still their homes. Paying off the mortgage and keeping up with maintenance means that if you need money later, you could use a reverse mortgage. On the other hand, if you struggle to pay the mortgage, taxes and maintenance now, you're not going to be able to do it down the road. Selling the property and getting out from under the burden might be painful, but wise.
  • Plan for a long illness. How are you going to provide for long-term care if you or your spouse needs it? Do you have insurance, a commitment from family or another idea?
  • Consider your spouse. If one of you dies, will the surviving spouse have enough money?
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March 04, 2011 at 5:43 pm

Is it ships or chips? 😉

March 04, 2011 at 4:45 pm

Actually, an average American's largest asset is their ability to produce income...not their home. We have to ignore the Lowe's commercials. 😉

This is why people fail. They are terrible at cash flow anticipation. They spend what they earn and assume life will never change. They will always be healthy enough to work and their wages will keep up with inflation and emergencies...etc...etc. We have a "cerdit card/Aflac/paycheck advance/direct deposit/refund anticipation" generation on our hands. The War babies knew that if they didn't get up in the morning and dig that hole, they weren't getting paid that day so they wouldn't have money to buy dinner.

Humans are programmed to put their head in the sand when people tell them things they don't want to SAVE. It is the deprogramming that is the work...

grey hare
March 04, 2011 at 1:40 pm

'game over.' West gov's borrow to pay interest,
can't pay down principle.
U - S owes $199t + , twelve zero, two hund tril., total
debts, gdp $15/t/yr. Warren bufft "we rich r winning"

March 04, 2011 at 9:12 am

Ships fall where they may. That may be the worst advice I have ever heard. Many a ship lay in the graveyards of once great ships. I assume you will be there also.

Failure to plan is where 75% of those who cannot afford to live missed out. It is not rocket science, it just takes time and the ability to watch your money grow if invested properly.

If you don't plan, then you will fail.

March 03, 2011 at 5:20 pm


What a stupid comment to make.

Rick Betteridge
March 03, 2011 at 1:06 pm

I started saving and planning for retirement in my early 30s. Very early on I left a position that had no pension benefit for one that had a retirement plan. In addition I began to save and invest around the same time. We lived comfortably but modestly so that we could save for the future. Over the last 35 years our investments have grown substantially. I now find myself comfortably in retirement, but somewhat in fear of what the federal government will be doing that could undermine that.

Milton Friedman, V
March 03, 2011 at 9:17 am

Increase the amount that is taxed for SSI above the current $106,800, a very anti-quated figure anyway. If SSI is in this much trouble, then move up the tax levels and get some more revenue in there. That way NO ONE has to wait longer for something OTHER received at lower ages. Are all politicians this stupid?

March 03, 2011 at 5:33 am

Fear, Uncertainty and Doubt.... nothing but fear-mongering in this article. Do you best and let the ships fall where they may.