Will You Outlive Your Money?

It's not all about how much you put away while you're working; it's also about how much you spend once you retire

by Mara Der Hovanesian

Retirees with plump nest eggs are attractive targets for unscrupulous financial advisers who advise them to make unwise withdrawals. "The 'why work' pitch is epidemic," says Peter Moujay, a Pensacola (Fla.) attorney. Moujay has represented some 100 retirees of Marathon Refinery in rural Robinson, Ill., and a similar number of AT&T telephone workers out of Michigan, who were targets of such a scheme. Here's a chart outlining how long your money will last given certain withdrawal rates. In this hypothetical case, a 60-year-old retiree who made $80,000 a year and had an $800,000 retirement nest egg would be flat broke by now if he retired Jan. 1, 2000, and took 10% a year from an aggressive stock portfolio. Even assuming average returns and a diversified portfolio, a retiree taking 10% a year has little chance of having money left at age 85. (Assuming 3% increases in payouts each year to keep up with inflation.)

Der Hovanesian is Banking editor for BusinessWeek in New York .