Baby Boomer Retirement: From Dream To Nightmare?
With 77 million Baby Boomers expected to retire in the next few years, a new study by Ernst & Young shows that the retirement bliss may be short-lived. According to Reuters today:
Almost three out of five new middle-class retirees will outlive their financial assets if they attempt to maintain their pre-retirement standard of living, according to a new study conducted by Ernst & Young LLP on behalf of Americans for Secure Retirement.
The study also finds that middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize the likelihood of outliving their financial assets. Those Americans seven years out from retirement are even less prepared and the study estimates that they will have to reduce their standard of living by even more, an average of 37 percent. These reductions will be necessary even when assuming that retirees can maintain the same standard of living with income equal to 59 to 71 percent of their pre-retirement wages.
Source: Gifts For Geezers
Tom Neubig of Ernst & Young told Reuters:
Many Americans envision a retirement where their lifestyle continues much as before. Our work shows that this is not a realistic expectation and that, with the current state of savings and potentially very long life expectancies, many retirees will have to cut back far more on expenditures than they had ever expected.
Ernst & Young staff concluded that retirees were much better prepared to have a financially-secure retirement if they had a guaranteed source of retirement income beyond Social Security. They predict that retirees with only Social Security as a source of retirement income have a 90% chance of outliving their financial assets during retirement.
According to Reuters, other key findings of the study include:
• Persons that are 5 to 10 years away from retirement have a higher risk of outliving their financial assets than those already at retirement age.
• Married couples, with their longer joint life spans, are more likely to outlive their financial assets than single households.
• Montana, Wyoming and South Dakota residents have the highest likelihood of outliving retirement savings.
• Washington D.C., Rhode Island, Utah, and New York citizens have the least likelihood of outliving retirement savings.
Source:
“Ernst & Young Study Finds Most Middle Class Retirees Will Outlive Retirement Savings”
Reuters, July 14, 2008
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