Retirement: How To Avoid Outliving Your Life Savings

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by Gary D. Halbert

October 21, 2014

Retirement: How To Avoid Outliving Your Savings


1.  Too Many Have Saved Too Little For Retirement

2.  Retirement Saving Balances Up; Number of Accounts Down

3.  Small Business Owners Don’t Save Enough For Retirement

4.  Fidelity Study: Tips For Saving More For Your Retirement

5.  America Has a Retirement “Spending Problem”

6.  How to Not Outlive Your Retirement Savings


With over 10,000 Baby Boomers retiring every day, a pattern that will continue for the next 20 years, retirement savings continues to be one of the most important issues of our day. With 76 million Americans born between 1946 and 1964 – the “Baby Boom Generation” – saving enough for retirement is critically important.

Unfortunately, study after study continues to find that most older adults have not saved nearly enough for their retirement, especially considering that we are living longer due to medical advances and taking better care of ourselves.

Today, we’ll start by looking at some recent data on retirement saving and how this remains a huge problem for most Americans We’ll also look into why it is that many people overspend in retirement and get into trouble. Following that discussion, we will look at some ways to make sure that you don’t outlive your savings.

Too Many Have Saved Too Little For Retirement

A new survey from found that more than a third of working-age Americans have nothing saved for their golden years. This includes 14% of people ages 65 and older, 26% of those ages 50 to 64, 33% of those ages 30-49 and 69% of those ages 18-29. Greg McBride, chief financial analyst for Bankrate.comconcluded:

“These numbers are very troubling because the burden for retirement savings is increasingly on us as individuals with each passing day. Regardless of your age, there is no better time than the present to start saving for your retirement. The key to a successful retirement is to save early and aggressively.”

Other recent research confirms that many people aren’t saving enough for their golden years. A similar study by the non-profit Employee Benefit Research Institute found that apprx. 36% of workers have less than $1,000 in savings and investments that could be used for retirement.

This same study found that 60% of workers have less than $25,000 saved toward their retirement. Many people realize that they are not on track in saving for retirement, but the two most important reasons they give for this are cost of living increases and low paying jobs that prevent them from saving more.

Other findings from the survey are mixed:

• Some people are starting to tuck away retirement savings at an earlier age. About 32% of people ages 30 to 49 started saving for retirement in their 20s compared with 16% who began in their 30s.

• About 24% of people 50 to 64 started saving for retirement in their 20s, vs. 21% who began in their 30s. About 16% of people 65 and older started saving for retirement in their 20s; 15% in their 30s; and 17% in their 40s.

• 24% are less comfortable with their debt than they were a year ago; 23% are more comfortable.

• Job security, net worth and overall financial situation are areas in which people have seen improvement over one year ago.

• 32% of people are less comfortable with their overall savings now than they were a year ago; 16% are more comfortable.’s  Greg McBride concludes:

“Month in and month out, consumers sound a dour tone about how they feel about their overall level of savings. Many people know they are under-saved whether it’s for emergencies, retirement or both.”

In another study, the Boston College Center for Retirement Researchestimates that in 2010, over half of working Americans, 53%, were on a path to having insufficient assets to comfortably retire at age 65. The National Institute for Retirement Security puts the total under-saving gap as high as $14 trillionnationwide.

Retirement Saving Balances Up; Number of Accounts Down

While the economic recovery has been disappointing over the last several years, those Americans with retirement accounts (IRAs, 401(k)s, etc.) have seen their balances go up over the last few years. The average balance in an American retirement accounts has risen 10% in the last three years. The median balance actually rose even more, up 25% to $59,000, according to the Federal Reserve’s 2013 Survey of Consumer Finances. That’s the good news.

The bad news, however, is the fact that the number of Americans who have retirement accounts has dropped below 50%. Only about 40% of Americans in the bottom half income bracket have retirement accounts at all.

In another study, the Center for Retirement Research’s “National Retirement Risk Index” shows that more than half of Americans are not saving enough for retirement. According to this study, 31% of Americans have no retirement savings, including 20% of those who are getting close to retirement age (55 or older).

It is a fact that in today’s struggling economy, millions of Americans are unable to save. Report after report has shown that America’s middle class is, at best, struggling to stay afloat. Five years after the Great Recession, it remains tough for many people to find and hold a steady job.

Millions of Americans had most of their wealth tied up in their homes before the housing collapse, and they haven’t come close to a full recovery. And a lot of working families are seeing their take-home pay drop. Others are still unemployed. For too many Americans, saving what they need to for retirement is simply not an option at this time.

Small Business Owners Don’t Save Enough For Retirement

America’s small business owners are wealth builders and are the largest drivers of GDP and job growth. But when it comes to their personal finances, they get low marks in asset diversification and retirement planning. That’s because the vast majority of their invested wealth is tied up in their businesses, which can shortchange their personal financial futures.

These findings were revealed in a recent study from CNBC and the Financial Planning Association (FPA). The study sampled financial advisors nationwide that service small business owners ages 35 to 70. And the headline finding:

A whopping 70% of small business owners’ wealth is invested in their
business, and only 30% outside their firms, according to the survey.

Small-business owners tend to be myopic and focus mainly on the viability and growth of their business, ignoring much else, including their long-term financial needs and saving for retirement. Yet neglecting a personal financial investment/retirement strategy and just plowing money into a business is fraught with risk.

Many small business owners have their company and personal finances so intertwined they cannot separate what is what, so they can analyze their broad financial picture. Too often this means that their only way to fund retirement is to sell and cash out, which can be difficult and stressful.

There is always uncertainty on how successful the owner will be in finding a buyer at the right time and price. Potential buyers may be reluctant to make an offer, especially if the company’s customers are emotionally attached to the owner.

The bottom line is that small business owners, generally speaking, have not saved nearly enough for a secure retirement.

Fidelity Study: Tips For Saving More For Your Retirement

In 2013, Fidelity Investments did a study on all of its 401(k) accounts with assets over $1 million. What the study found was that about 28% of participants’ 401(k) balances came from their employers who match employee contributions to varying degrees. Among these large 401(k)s,  most participants took full advantage of the employer’s “match” and any profit sharing.

Next, Fidelity found that most individual participants in these large 401(k)s started saving for retirement in their 20s, and that they saved at least 10-15% of their annual salaries. Of those who worked for publicly-traded companies, most held a significant portion of their 401(k) in their company stock, as well as stock mutual funds.

Unfortunately, many people hold too much of their company’s stock and are therefore not diversified enough. If their company’s stock price declines, that can lead to large losses.

Also, Fidelity found that most of the participants in large 401(k)s did not cash-out their account balance when they changed employers. Most preferred to leave it in the former company’s 401(k) plan, transfer it to the new employer’s 401(k) plan or roll it over into an IRA. The point is, they didn’t cash out.

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