Saving less for retirement not optional
Are you among the record 51 percent of American households considered at risk of not having enough money to sustain your standard of living in retirement?
Even if you work until age 65, take out a reverse mortgage on your home and use all of your assets, including the reverse mortgage proceeds, to buy an inflation-adjusted lifetime annuity, you may not have enough money to last a lifetime if retirement savings are inadequate, writes nationally syndicated columnist Humberto Cruz in the Nov. 29, 2009, Milwaukee Journal Sentinel.
That conclusion is based on the 2009 National Retirement Risk Index, calculated by the Center for Retirement Research at Boston College. Typically, the college updates the index every three years based on the latest figures from the triennial Federal Reserve survey of consumer finances. However, given the current economy, researchers updated the index sooner using estimated figures.
“Unfortunately, many Americans are reacting to the economic downturn not by resolving to save more but by no longer actively planning for retirement,” Cruz writes. He cites an Employee Benefit Research Institute study, which found that only 40 percent of Americans participate in an employment-based retirement plan.
A separate study by Hewitt Associates found that 46 percent of workers with a 401(k) plan who left their jobs in 2008 took a cash distribution rather than roll over the money — an action that penalizes workers under age 55 and leaves people without retirement funds that can grow over time.
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