Released: June 07, 2006

43% not saving enough to retire well

Source: By Kathy Chu, USA Today

A new retirement study provides further evidence that a growing number of Americans are at risk of a diminished standard of living once they stop working.
The Center for Retirement Research‘s new retirement-risk index, released Tuesday, shows 43% of working households were in danger in 2004 of having too little income to fund their retirement.

But the study probably understates the proportion of retirees at risk. Its projections assume that people retire at age 65, cash in on their home equity through a “reverse mortgage” and exchange their assets for a stream of income by buying an immediate annuity.

Yet many people retire before 65, according to the center, and don’t necessarily buy immediate annuities or take out reverse mortgages. Nor does the research take in account the “wild card” of health care costs — and how these expenses will affect retirees’ standards of living, says Alicia Munnell, director of the center at Boston College.

The percentage of “at risk” households has surged in the past two decades, from 31% in 1983, according to the center’s analysis, which was funded by Nationwide Mutual Insurance. Two factors that have raised the risks are the growing uncertainty of Social Security payouts and the increasing burden on employees to save for their own retirements.

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