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Retirement Glass: Half Full or Half Empty?

Posted by: Michael Mandel on June 06

If I had a dollar for every scare story about Americans not saving enough for retirement, I could retire tomorrow.

That’s why I enjoyed reading the new study from the Center for Retirement Research at Boston College, directed by Alicia Munnell. The study “measures the share of working-age households who are at risk of being unable to maintain their pre-retirement standard of living in retirement.”

The headline number from the study was scary: 43 percent of households are at risk of falling short in their retirement resources. That even takes into account their housing wealth.

But the study makes a point of stressing the good news as well:

But the situation is not hopeless—if people chose to work longer—even just two years—and save 3 percent more, they can substantially improve the outlook for their retirement security.

In fact, some of the underlying numbers in the study suggest even more optimism to me. Just working two years longer reduces the percentage of households at risk from 43% to 32%. This means that even retirement procrastinators have a chance to catch up at the end of their work life.

The other fascinating tidbit which comes out of the study is that one-income households are in substantially better long-term shape than two-income households. So 23% of one-earner couples are at risk, compared to 45% of two-earner couples.

Why should this be? Just because of the way that the Social Security laws are written. As the study notes:

This outcome is virtually inevitable in a Social Security system that provides a 50-percent spouse’s benefit. As women go to work, they increase pre-retirement earnings but often fail to increase the benefit received.

To put it a different way: The calculations assume that two-earner couples have a higher target retirement income than one-earner couples, since the two earner couples had a higher income during their working lives. However, one-earner couples get the added Social Security benefit for the non-working spouse, which pushes up their retirement income.

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Reader Comments


June 6, 2006 02:47 PM

What kind of math does these analysts use? It amazes me that every calculator assumes that I will need the same level of income as I make today to retire comfortably. Why should that be the case? If I do it right, I will retire with no bills, a paid off home, and a simple life. Retiring and spending my late 60s and 70s jet-setting around the globe visiting places, going out to eat every day, and buying new cars each year doesn't sound appealing in the least. Let's be honest here, who is going to have the energy or desire to do that stuff?

I see a lot of fear mongering going on. I've also seen my grandparents retire debt free and fancy free, enjoying a simple life. I wonder if the same will be said about the boomers.


June 6, 2006 04:33 PM

I can't afford the lifestyle I am living today, why should I expect to be able to afford it later? :)


June 6, 2006 07:25 PM

households who are at risk of being unable to maintain their pre-retirement standard of living in retirement

I, too, think this is too high a standard to expect for most people in retirement. They may wish it, but that doesn't mean they are able or willing to do what is necessary to attain it. It really is possible to live comfortably with less, and in cases, with much less if you are debt free and own your own home. I suspect the main reason working longer would balance the equation is more would die sooner in retirement, not that they can save that much. I wonder how much their predictions are based on disappearing pensions.

A J Long

June 6, 2006 09:12 PM

At least this is a start. I think that many of the scare stories, like needing 100% of current income) are ridiculous. Whether intentional or not our life styles change after retiremnt and needs can be substanially less. I am retired (20 yrs) live on approx 20% of peak earnings years and do everything that I want and am able to do. Play golf 5 or 6 days a week, travel once or twice a year(not luxury world cruise). A substantial reason for this is Medicare.


June 8, 2006 04:40 PM

Great article. I never understood the overwhelming nature of these warnings.

Surely over 50-60 years you've established something!

Mike Mandel

June 9, 2006 10:23 AM

Actually, one of the reasons why I liked this study is that it did not require retirees to have 100% of their pre-retirement income. Instead, they used a target replacement rate of 73%, which varied slightly depending on personal situation.


June 10, 2006 06:45 PM

Realistically, the elimination of savings and work related expenses should reduce expenses 25%, debt free and home owned 25%, Social Security 25%, leaving only 25% to be covered by pension and savings. It still takes a large amount to savings to provide this, say 25% of $1.25M or $312K.


July 16, 2006 07:20 PM

Well, it sure helps to NOT have to buy gas for daily commuting! :-)
So far, we're living on a bit less, due to saving a chunk beforehand (not tons, though), reduced work expenses, and a simpler, but happy, life. We still travel, and it helps to have bought nice timeshares before we retired. (We travel beyond those too.) Food expense has not lessened however. We're retired about 12-18 months...still worry a bit abount "uplanned" surprise expenses.


October 16, 2006 10:27 AM

My perspective is marketing hype coupled with government overspending. My husband was dead at 51. No one will ever get the over $100K he paid into the SSA - my income exceed his, much less what his company(s) matched. What about that crummy money? Who does it go to? So I say you should spend some and save some. We were married for 33 years. Our children are in their 30's. All this hype expects the majority to live into their 80's. I don't believe it. Further, with my latest statement from the crooks at SSA, I find a 20%+ decrease if I retire at 67 versus 70. I'll wait the 3 years if the gov't people just don't tax it all away by then anyway.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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