Will You Have to Work Until You Die?!?

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I hope you are sitting down, because you are going to need much, much more money than you think to retire -- or you could end up working until you die.

The figures cited by experts vary from a half million to $2 million plus. According to the AARP, you need to save nine times your salary at age 60 to retire. Since the Bureau of Labor Statistics calculates a mean wage of $46,440, that adds up to a $418,000 nest egg. If you want to do more math, that's 40 times what the average American family has saved for retirement.

More discouraging, a recent e-book, Is "One Million Dollars Enough? "by USA Today retirement columnist Rodney Brooks, suggests you need at least a $1 million saved to retire, and $2 million -- depending on your lifestyle -- may not be enough.

But only roughly 1 in 10 households boasts millionaires. The National Institute on Retirement Security suggests even if you aren't a millionaire, "to maintain its standard of living in retirement, the typical working American household needs to replace roughly 85 percent of pre-retirement income."

The U.S. Department of Labor cites expert consensus that Americans should save 70 percent of pre-retirement income and up to 90 percent for lower income workers. According to the latest annual Transamerica survey on retirement only a quarter of American workers think they will need $2 million to retire.

American Dream -- or Nightmare?

Most frightening is that the average American family has less than $10,000 earmarked for retirement, according to the National Institute on Retirement Security, and 38 million households have absolutely nothing saved for retirement. "The American dream of retiring after a lifetime of work will be impossible for many," write Diane Oakley, its executive director.

Gone are the days of cushy pensions and adequate Social Security benefits -- if these ever existed. Not to mention, a million isn't the fabulous sum it once was -- and people are living longer. According to the U.S. Department of Labor, the average American spends 20 years in retirement. About the only thing financial experts seem to agree on is, to paraphrase the old Chicago political slogan, "Save early, save often."

Baby (Boomer) Steps
  • The only other thing the experts agree on is the closer you are to retirement the more you need a plan. A plan will help maximize your returns and anticipate and mitigate the effects of taxes and health care costs, the two largest expenses for retirees. Finding a trustworthy financial planner is the first step, and the Certified Financial Planner Board of Standards encourages, " ou can afford to retire comfortably if you develop a solid plan and make smart choices along the way." And strongly consider a fee-only' adviser rather than a fee-based adviser.
  • Diversifying your retirement portfolio is a key strategy, notes board of standards consumer advocate Eleanor Blayney. "There is no one product, fund or savings account that will take care of all your retirement planning needs. For example, annuities may generate a steady income, but they don't provide liquidity for big, unexpected expenses. Target-date funds may take care of portfolio rebalancing, but may not respond well to unexpected market events."
  • Plan to live within your means. This is truer than ever as Charles Dickens' Mr. Micawber so memorably said, "Annual income 20 pounds, annual expenditure 19, 19 six, result happiness. Annual income 20 pounds, annual expenditure 20 pounds, ought and six, result misery." Pay off any major debts like credit cards and mortgages before retirement. Some experts suggest possibly downsizing your home and refinancing, but the ultimate result is the less you have to spend the more money you have 'til the end.
  • An emergency fund is important, although it may seem counterintuitive if you are already saving for a future retirement. The sad fact is almost half of retirees were forced to retire earlier than planned due to health issues or job loss, a figure that has remained steady for several years, according to the Employee Benefit Research Institute. Its annual retiree confidence survey "consistently found that a large percentage of retirees leave the work force earlier than planned (49 percent in 2014)." At least six to 12 months of living expenses at a minimum is recommended. This is good advice for anyone at any age but for those closest to retirement, finding a new job or dealing with added expenses during a health crisis is particularly stressful. Other reasons for having an emergency fund, according to rothira.com, are to protect you during market downturns and home or auto disasters.
Worst-Case Scenario

You dream of retirement, but as John Lennon wrote, "Life is just what happens to you while you're busy making other plans." So, you may have to continue working but are definitely not alone. According to Sara Rix of the AARP's Public Policy Institute, "Over the past two decades, however, there has been a sharp increase in the labor force participation rates of all older age groups, even those aged 75 and over."

Even if you still have to work, you might still be able to pull off that dream of retirement with the right plan. If you're very lucky you might never want to retire because you love your work. Whichever of these is your situation, don't regret not making plans -- just start saving right now, this very minute.
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