US seniors risk outliving their money

A new study indicates that the elderly in 48 states and the District of Columbia won't be able to replace the recommended 70% of their pre-retirement income.

By Donna_Freedman Jun 10, 2013 9:53AM

Logo: Couple paying bills (Corbis)How much do we need for retirement? More than what we're currently saving, apparently.

A new study from found that seniors in 48 states and the District of Columbia are at risk to outlive their retirement monies.


The golden years aren't all that golden: Nationally, the average income of the 65-and-older crowd is only 57% of the money earned by those aged 45 to 64.

"By anybody's definition, that's just not enough," says Mike Sante, managing editor at

"There's no reason to believe that seniors are living high on the hog in this country. At least most of them aren't."

Researchers also compared the two groups' median incomes with a specific number in mind: 70%, based on the notion that retirement income from all sources should total 70% of the salary you make during your last year or two of earning.

According to Sante, the retirees' income would ideally be 70% or more of the still-working younger cohort. That's because both middle-aged and elderly adults pay for many of the same resources, such as groceries, utilities and housing.

The magic number was found in just two states, Hawaii and Nevada, both of which were a hair over the 70% mark. Nineteen other states and the District of Columbia came in at 60% to 68% and the four lowest-ranking states (Massachusetts, New Jersey, North Dakota and Rhode Island) ranged from 45% to 49.5%.

"Many senior citizens are significantly underfunded and risk running out of money, especially since people are living longer," says Sante.

More and more are retiring with still-unpaid mortgages, he adds, and many underestimate the cost of age-related health issues: "Anybody who thinks that Medicare (will pay) all their bills hasn't been around anyone on Medicare."

Bracing for a crisis
It's tough to get by just on Social Security, and defined-benefit pensions are fading away. That leaves personal retirement planning and/or asset accumulation to make up the difference.

We're not doing too well at either one. A recent study from the Employee Benefit Research Institute notes, among other things, that 57% of U.S. residents have less than $25,000 in total household savings and investments (excluding their homes). That's up from 49% in 2008.

The Wall Street Journal sums up the EBRI study this way: Workers are saving too little to retire. In fact, only 66% of us are saving at all. 

"Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement," The Journal notes.

"(Powerful) financial and demographic forces are combining to squeeze individuals and companies that are trying to save for the future and make their money last."

Given rising life expectancies it's very possible to outlive any money you've saved. Companies that still offer pensions will experience sympathy pains, since longer lives mean more stress on pension funds -- as much as $97 billion worth in the coming years, according to The Journal.

A life-changing benefit

In a New York Times guest article, University of Chicago professor Richard H. Thaler proposed a relatively simple solution: Build a better workplace savings plan. He suggests a two-pronged approach:

Make payroll retirement savings universally available
. Currently this is an option for about half of American workers (and only 42% in the private sector).

Make them automatic
. According to Thaler, simple procrastination keeps about one-fifth of workers from enrolling in payroll savings even when offered employer matching funds. He believes employees should be enrolled automatically unless they specifically opt out.

The same inertia that now keeps people from opting in could keep future workers from opting out. Such automatic enrollment plans already exist, and companies that use them find that few employees make the effort to leave the program.

"The burden on employers would be tiny, and the benefit to workers could be life-changing," says Thaler, a professor of economics and behavioral science.

Take charge of the future

Maybe you think you can't afford to save for retirement on what you earn, especially if you have student loans or house payments.

But you can't afford not to -- and if you're young you have time (i.e., compound interest) on your side. Even if you can save only a tiny amount, do it anyway and plan to increase contributions as you get raises and/or pay down other obligations.
Suppose you're in your late 30s, 40s or (yikes) 50s and haven't done much about retirement planning? Get going anyway, even if basic expenses are rising faster than your ability to earn. You may not make it to half a million, or even to $100,000, but every dollar you put aside today will make a big, big difference to the future you.

As I noted in "Is it ever too late to start saving?," it's terrifying (and at times paralyzing) to be in your late 40s with no savings at all. But retirement age is approaching, inexorably. You can't wish it away. It's crucial to start planning lest you hit 65 with little to no cushion.

No one will take care of the future you except the current you -- and since the average Social Security payment is $1,266 per month, the future you will be very glad you bothered.

And if you do nothing at all? The future you will judge the current you. Harshly.

Are you saving for retirement, either at work or on your own?

More on MSN Money:


Jun 10, 2013 4:31PM
I made more at my job in the early 70's than most average people make now. I had health care, dental care, and vision care. I had no credit cards and did not need one. My utilities were about 14 dollars a month and phone was about 7. Housing prices were stable, and jobs were there for those who wanted to work . It isn't hard working American families who created this mess. You don't have to look to far , to find out what group made sure we are serfs. Look east.
Jun 10, 2013 1:36PM
It is always humorus to me that these "studies" know how other people should spend their money, how much money they have been able to save, and how the future will be for them.  It is always big ME and little you in these "studies."  I have worked all my life and have been able to save nothing.  I could have saved a good bit had our "free" government not taken so much from me to give to those who won't work.  To them, I guess it is a "free" country.  To those of us who worked and who still work, nothing is "free."  I am patriotic, but being patriotic does not mean I believe everything (or anything) I hear from that $hithole called Washington, D. C.!  If the US map was a bull, Washington, D. C. would be his ashhole.
Jun 10, 2013 1:09PM
I'm always amused by the public sector folks with all the smug answers while being one of the main sources of high prices for private sector seniors through their overblown pensions/salaries/benefits all on the public dime and paid for by taxing the Social Security of others while not belonging to either Social Security or's easy to be smug and have all the answers...and talk down to the public.
Jun 10, 2013 1:04PM
As a scientist I find these studies so ridiculous in terms of what they don't count that I wonder if there's an ulterior motive to them.

For example, home ownership vs rent isn't counted, nor is employer subsidized or low-large-company-rate health insurance.

if I didn't have my mortgage paid off or needed to rent an apartment I'd need at least $1000/month greater income to live at the same level I live now.  If my very-large (low insurance rate) employer didn't pay 75% of my excellent BCBS health insurance - which becomes at 65 my Medicare Supplemental, Prescription, Dental, and Vision insurance, I'd need to spend at least $400 more per month on healthcare compared to Medicare A & B alone mainly because of the remaining prescription donut hole which my BCBS doesn't have.

That's roughly $17,000 per year in less needed spending - about 25% of my 2006 salary at retirement (when I was still in the last months of my mortgage) that's not taken into consideration at all.  When you add in the no work-related costs, more time for comparison shopping and cooking for myself, etc I could life well on 50% of my preretirement income.

Seriously, if my sophomore, high-school, gifted and talented, chemistry students had left out the equivalent major considerations in their lab studies this study does, I'd have required a do-over with a grade penalty.

Jun 10, 2013 3:43PM
My savings before retiring 26-7 years ago doesn't buy much at today's prices. Inflation caused by spending trillions of dollars on useless and unnecessary  things. Buying votes to keep lying, thieving politicians in office is at a huge cost. Much waste on simply paying interest on national debt. $16.85 trillion debt. NO more aliens to support. NO more 'born on welfare'. NO more aid to likely enemies.
Jun 10, 2013 2:51PM
I've worried about retirement my whole self employed life.  There are no employer matches for the self employed, rather if you set up a retirement plan, you pay the match for your employees.  And if they don't bother funding their retirement, you are limited in what you can contribute to your own plan.  Trust me small business gets no breaks.  My brother and sister worked in government and have great retirement plans.  Both were able to retire five year younger than I am now.  I just keep working, and saving half of my income, in hopes that one day it might be enough.
Jun 10, 2013 1:24PM
One of the biggest problems is the IRS taxing the living c-wrap out of SS and the retirees savings accounts. Frankly the ceiling before earnings are taxed once starting be 66 should be $100,000. That would exempt the 90% who being bowled over by this IRS policy of tax, tax, tax those who could least afford it.
Jun 10, 2013 2:17PM

Nationally, the average income of the 65-and-older crowd is only 57% of the money earned by those aged 45 to 64


If you planned right, 57% is close to all you should need. People need to think when they take out a 30 year mortgage, did you plan so that you would have it paid off before you retire? I bet most people have not. Also, sock away savings every year to cover home maintenance expenses even when no repairs are needed. Obviously, there are certain pitfalls that cannot be accounted for. However, a high percentage of the population would do well if they followed a strict savings plan and lived well below their means.



Jun 10, 2013 1:27PM
How could it ever be possible in the US for 80% of the Seniors to retire at all, given the facts of the volatility of the Stock and bond markets and the income of seniors has not grown but has been reduced over the last twenty-five years. Saving money was an impossible dream for most, because it was all to keep their heads above water with little or no discretionary income.The handwriting was on the wall many years ago and at that time there should have been an outright revolt in the US. I am fortunate to have a demand pension plan from a stable company and a couple of annuities to fill the voids. If we didn't have that, we would be living in poverty with the bulk of the rest of the 80%.The article more or less targets an impossible dream with putting blame on seniors for not taking advantage of something that was outside their reach.
Jun 10, 2013 3:25PM

The point people should take away from reading these types of articles is that you should have a plan for your retirement.  The younger you start planning and investing the easier things will be when you get older. I am lucky both of my parents taught me at a young age the importance of saving and living within your means.


Like my parents, I have always been a good saver, but I was not a good investor until I was in my late thirties. I learned by trial and error how to invest and I become good at it. I have short term and long term goals. Like many people I have been laid off and had to start over again. I have learned it is easier to deal with life’s unexpected events by having a plan.


I live within my means. I do not have any debt and I keep an emergency fund for those unexpected rainy days. I am currently in my late fifties. I do not plan on retiring until at least another ten years.  When I do retire I would like to live comfortably and have the funds to travel and enjoy life.


I am on target to achieve the retirement goals I have in place. It is easier to have peace of mind for when you retire if you have a plan. Have short-term and long-term goals. Live within your means. Plan for the unexpected and try to stay out of debt.  

Jun 10, 2013 2:04PM
If people of any age try to save anything, then CONgress will get it when they get old.  I am not making this up.  Look at the trend.  For the young who think Medicare is there to take care of you when you get old, as I once thought, there is a shockwave in your future!  I was too busy "working" to look ahead.  Now, at age 64, I start get endless "medicare supplement" correspondence, by mail, phone, and email, not to mention the back to back "medicare ads"  know..."you kin choose yore on docker" stuff.  You work all your life, then you PAY FOR MEDICARE and if you still want insurance, you PAY FOR A SUPPLEMENT.  Then if you want prescription help, you PAY FOR A DRUG PLAN.  And what is the shocker of all...those who wouldn't work get all this for FREE!!  Good 'ole US of Ash!!!
Jun 11, 2013 2:56AM
This article and most of the comments assume that the money you save all your life will be the money you will have in retirement. What about all the seniors who lived within their means, scrimped and saved for retirement, and saw their retirement plans disappear between the last couple of recessions and the nonexistent interest rates on their savings? Thousands of people, most of them already retired and unable to replace the money,  have lost their life savings through no fault of their own.
Jun 10, 2013 1:32PM
avatar many people choose to not live within their means...can't keep up with the jones so don't try.  overspending on a house is a huge mistake.  remember one half of the equation is spending...move to where the cost of living is not so high.  every other time you get a raise during your 30's and 40's...invest it, invest it, invest it.  when you start drawing out savings do so using only 3% or less the first five years.  that has been my formula and I am sticking to it. 
Jun 10, 2013 4:54PM
I plan to spend all my money having fun, traveling, and giving my daughters fun money,,,and enter retirement completely impoverished so I qualify for the gov'ment subsidized housing, medical care, 'bamaphone, nursing home (if needed), meals-on-wheels, etc.  Where's my free cheese?
Jun 10, 2013 5:12PM
Seniors, don't worry, the young of today voted for everyone that did not pay taxes to get free everything, they will pay and pay, while social services will increase and they will continue to vote themselves a lower standard of living!
Jun 10, 2013 4:18PM
Who says you need 70% of your pre-retirement income?  Sure, if you retired making 100k per year, 70k per year would be a nice retirement income.  But if your house is paid for (as it should be) and if you aren't carrying any debt, you should be able to retire comfortably on a whole lot less.
Jun 10, 2013 4:21PM
It doesn't matter how much you save.  Once you're in a nursing home at $400/day, it will quickly evaporate; subsidizing Medicade residents until you too are on Medicade.  It doesn't matter if your spouse is still healthy and independent.  They'll go rocketing to the poor house writing checks until there's just about $100K left for their retirement.
Jun 10, 2013 4:00PM
I'm retired and I'm not worried. If the young can live off of welfare, food stamps, free health care, who needs money. If my money runs out, I'm good.......
Jun 10, 2013 4:00PM
A ton of Seniors have inherited a home or have their own Mortgage already paid off. Think of the price paid for those homes back then and the Prices, NOW. Most Seniors will continue to benefit from Social Security and Medicare benefits while the next Generation, not so much. The Current Seniors benefited from far greater Job Security and on the Job Benefits. Bottom-line, the vast Majority of Seniors were born in a Generation of Better Opportunities while the Generation that will  follow, faces far greater challenges in order to even reach Retirement.  Current Seniors should consider themselves lucky compared to what the next wave of Seniors will have to face.
Jun 10, 2013 11:08PM

With Zero interest, Welcome to the world of Obama....


So many of the idiots that voted for Obama will not only have his debt to pay off, but will have to take care of the elder parents as well...



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