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Will Your Retirement Savings Run Out?

July 20, 2010

By Barbara Marquand | Money Rates Columnist

Delaying retirement is sounding better and better -- or at least smarter and safer -- given the growing number of studies showing so many of us aren't saving enough for retirement.

Among the latest are findings by the Employee Benefit Research Institute (EBRI), which says a dramatic percentage of people -- even those in upper-income brackets -- are going to run short of money after they quit working.

The EBRI's recent analysis finds that almost two-thirds of Americans in the two lowest pre-retirement income levels will be short of money after 10 years of retirement. One-third of people in the next-highest income level will be short of money after 20 years in retirement, as will 13 percent of people in the highest-income level.

The risk is about even among age groups. Almost half of early Baby Boomers, those ages 56 to 62, are at risk of running short of money in retirement, and about 45 percent of Generation X'ers, those ages 36 to 45, and 44 percent of late Boomers, ages 46 to 55, face that same risk.

Savings Rates Need Improvement

This is the first time a national rating model has gauged when different age and income groups of Americans will run out of their retirement savings.

What exactly does running short of money mean? We're not talking about having to skip the 90-day cruise or giving up the vacation home. The EBRI says it's basing projections on meeting basic living expenses as defined by the Bureau of Labor Statistics' Consumer Expenditure Survey and health care expenses.

The problem stems from a variety of factors. Many people underestimate how much money they'll need when they retire, and some just aren't able or willing to set enough money aside. Dented stock portfolios, lower home values, and bottomed-out money market account and CD rates for cash investments don't help, either.

As a result, a growing number of aging Baby Boomers are continuing to work, and some early retirees are looking for jobs -- not a bad idea, considering the current state of affairs.

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