Looking at living longer with less

Susan Reimer

August 3, 2008

Not long ago, I wrote that "near retirees," as we are now known, should consider working past the ages of 62 or 65 for all sorts of economic reasons, and we should salve our disappointment by doing some of the things now that we thought we would do in retirement - golfing in Florida or traveling in Europe.

We should consider reducing our retirement savings to pay for these rewards because those dollars won't have much time to grow before we really do retire.

But that was before the economy started dropping like an elevator that's had its cable cut.

Now a new study warns that if we "near retirees" (ages 58 to 65) don't make substantial cutbacks in our current standard of living - by as much as a third - most of us will out-live our savings.

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This is called "retirement failure."

"Unless workers aged 55 to 59 increase their saving substantially or work beyond age 65, they will be unable to maintain their current standard of living and will have to reduce their standard of living significantly more than today's retirees to minimize the risk of exhausting their financial assets," the study said.

This means no golfing in Florida and no traveling in Europe.

And no new cars and no eating out every night, while we're at it.

The study was done by Ernst & Young, and it was commissioned by Americans for Secure Retirement. Researchers found that Americans aren't saving enough for retirement - nothing new there. But we are also underestimating how long we will live.

(I took one of those online longevity tests, and it looks like I will live to be 105. I don't want to live to be 105, whether I have the money or not.)

Even if you have been saving like mad - stashing money in 401Ks and IRAs - this is a very bad time to be a near retiree.

The market is in free fall, so whatever you have saved is evaporating. Inflation is rising, and it will eat away at what's left like Japanese beetles on a rose bush.

General Motors pointed the way to the future when it stripped its salaried retirees of their health insurance, a commodity that costs thousands of dollars a year on the open market.

And more and more companies are turning to lump-sum retirement distributions, handing employees a pillowcase full of money and telling them to figure out how to make it last until they are 105.

The answer is the worst of both worlds. We are being told we have to live like we're retired, with all the coupon-clipping and the penny-pinching, but we still have to get up and go to work every day.

That is, if you still have a job to go to.

It is hard to focus on working an extra decade when your industry - newspapers for me, financial institutions for others - is melting away.

Not everybody can work at Home Depot, you know.

So, the solace I took when I realized that I wasn't going to be retiring early - that there could be trips and toys while I still earned a full paycheck and had my health - is all but gone.

Great.

It is hard to gin up any enthusiasm to prepare for a phase of life that, if it ever gets here, will last too long.

susan.reimer@baltsun.com

Staying young, growing old and what happens in between