Study: Most middle-class retirees will outlive retirement savings
Washington Business Journal - July 14, 2008
Almost three out of five new middle-class retirees will outlive their financial assets if they keep up their pre-retirement ways of living, according to an Ernst & Young LLP study on behalf of Americans for Secure Retirement.
The study found that D.C. residents, along with those from Rhode Island, Utah and New York, are the least likely to outlive retirement savings.
But on average, middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to ensure they don’t outlive their financial assets.
“Many Americans envision a retirement where their lifestyle continues much as before,” said Tom Neubig of Ernst & Young. “Our work shows that this is not a realistic expectation and that, with the current state of savings and potentially very long life expectancies, many retirees will have to cut back far more on expenditures than they had ever expected.”
People seven years out from retirement will have to reduce their standard of living an average of 37 percent, the study says.
Retirees with a guaranteed source of retirement income beyond Social Security are more likely to salvage their assets.
“As a guaranteed source of retirement income, life annuities relieve the risks and burdens of managing a nest egg and can maximize savings’ value over the course of an individual’s retirement years,” said Joe Reali, chairman of the D.C.-based Americans for Secure Retirement coalition.
The study found that Montana, Wyoming and South Dakota citizens have the highest likelihood of outliving retirement savings.
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