Is it too late for a happy retirement?

This post comes from Stacy Johnson at partner site Money Talks News.

Here's an email I recently received from a reader who's about my age and is wondering what her retirement is going to look like. Or rather, if she's even going to have one.

Over the past couple of years, I've been working to get my financial life in order -- but I'm worried it's too late. I rent an apartment with my 13-year-old son, have no debts, have $4,000 in my emergency fund, and a work 401k with $35,000 in it. It doesn't sound so bad, except that I'm 57 years old. According to my calculations, I'll have to work until I'm 70 years old and live to 84. Do you have any suggestions or comments?
-- Susan

The first comment I'll make, Susan, is that you're in a crowded boat. I'm more or less in the same one, and I'll bet there are plenty of people reading this who are, too.

When my father passed away a few years ago, he had been retired for close to 30 years. Despite the fact that he never made more than $50,000 in a single year, he was never short of cash in retirement. Between military and civilian benefits, he was bringing in nearly as much retired as he made working: $45,000 a year. And because he lived a very modest life in a place with a low cost of living (suburban Atlanta), he saved more of his retirement income than he spent.

His son, on the other hand -- yours truly -- faces a much different future. Having been self-employed for more than 30 years, the only pension I'll be getting is from Social Security, and the only other income I'll have is what I can generate from my investments and retirement accounts. Unlike my dad, nobody but me is contributing to my retirement. I don't have a company pension or anyone matching my retirement plan contributions.

I also have another problem: I don't live in a low-cost area. The property taxes alone on my modest Fort Lauderdale home are 10 times what my father paid -- enough to consume one-third to one-half of my expected income from Social Security.

Of course, I made this bed myself. I chose where I live and what I do for a living. But millions more find themselves in this situation because of something they couldn't control. Namely, the replacement of traditional company pensions (called defined-benefit plans) with the retirement plan more prevalent today (called defined contribution).

Defined-benefit pension plans are like Social Security. They guarantee a monthly check for life. You can't outlive the money, and the risk of having enough set aside is the company's -- not the employee's. In my father's day, these were common and funded by the employer. Defined-contribution​ plans, on the other hand, shift the burden to the employee. These plans -- think 401k -- have no guarantees and are largely funded by you.

Result? You contribute as much as you can afford, then hope the market doesn't melt down on the eve of your retirement and that your balance is enough to keep you comfortable for the rest of your life. If it isn't, that's your problem, not the company's.

According to this 2011 study from consulting firm Towers Watson, in 2002, 83% of Fortune 100 companies provided defined-benefit pension plans. Today that number has dropped to 30%. That increases the likelihood that, with each passing day, more people will be in this scary boat. Post continues below.

What can we do?

While I do have a lot more saved than Susan, depending on what happens and how I choose to live, it still might not be enough. For example, if interest rates stay this low, generating an adequate income (at least safely) from my retirement savings will be tough. That leaves me with one or a combination of the following choices:

• Radically reduce my cost of living when I retire, perhaps by moving to a lower-cost home here in Fort Lauderdale or somewhere else.
• Accumulate as much as possible now, then pray for considerably higher interest rates on low-risk accounts by the time I retire.
• Keep working past traditional retirement age.
• Supplement my retirement income by spending my principal, then hope I'm dead before it runs out.
• Take a measured amount of risk with my retirement savings to create more.

These are my choices, and Susan's as well. And what she and I will do is probably a combination of all of them.

All of us -- Susan, you and me -- need to put as much money aside as we possibly can. How?

• Spend less, save more. One way to spend less and save more is to create a savings goal, then find the money to reach it by creating a spending plan, also known as a budget.
• Pay less interest. Since paying interest on debt steals money we could be saving, we need to get rid of it.
• Save smart. When it comes to making our savings work as hard for us as we do for them, we need to learn to take an acceptable level of risk. We also need to get the highest interest possible on our savings.
• Make more. Since what you make now will influence what you'll have later, get the highest pay you can. See "The 5 best ways to make more money."

Susan also recognized what may be the only true solution: "work until I'm 70 years old."

While that may sound depressing, it doesn't have to be. Because in an ideal world, none of us would be "working" at all.

Unlike my dad, I love what I do, which means I don't "work," at least in the sense of doing something I hate in exchange for money. If I win the lottery today, I'll still be sitting here tomorrow. Granted, I certainly want to work less as I age, as well as have the ability to not work at all if I choose.

But what we all should be seeking are careers that keeps us coming back for more, especially if retirement looks murky. Because if you use every trick in the personal-finance book and still won't have enough to retire, doing something meaningful and rewarding is the only way your later years will be golden, both physically and emotionally.

I wish I could provide a magic bullet -- a simple solution that would guarantee that those approaching retirement without sufficient savings could lead the life they've worked for and deserve. But finding work they love may ultimately be their only salvation.

More on Money Talks News and MSN Money:

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