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3 of 5 Retirees Projected To Outlive Their Savings
Old 07-15-2008, 07:17 AM   #1
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3 of 5 Retirees Projected To Outlive Their Savings

According to a new study (commissioned by an organization that lobbies "for policies to help Americans retire'), three of five retirees will outlive their savings if they don't cut their spending and live more modestly. People retiring today may face a 24% cut in their living standard; in seven years, 37 percent.

"Baby boomers" may still outlive assets - Yahoo! News

Personally I don't know that I could cut my spending since it's always been so low.

I'm trying not to worry about this too much since they are talking about "typical" people who haven't saved very much; the study cites:

so-called near retirees, at age 58, have an average nest egg of $105,000 if their yearly income is $50,000. Their savings rise to an average of $280,000 if they earn $100,000 a year. New retirees, with an average age of 65, have $175,000 in savings if they earned $50,000, and $585,000 if they earned $100,000 a year


But when I read "The very real possibility of living to age 90 or 100 combined with the volatility of inflation and investment returns means that the risk of outliving one's assets is quite high," I can't help worrying. Words of wisdom from those of you who don't get concerned reading this stuff?
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Old 07-15-2008, 07:26 AM   #2
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Don't worry, Medicare and Social Security will pick up the slack and there is no WAY those are going to ever go under, right?
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Old 07-15-2008, 07:30 AM   #3
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Originally Posted by tangomonster View Post
Words of wisdom from those of you who don't get concerned reading this stuff?
If 3 of 5 are predicted to outlive their assets, then 2 of 5 (40%) aren't. That could be due to having a large nest egg, investing wisely, LBYM, dying "early", or any combination of those or other factors. I managed to build a large enough nest egg to retire somewhat early (58 ) certainly something 40% of the population isn't willing or able to do. If I can do that, then I'm fairly certain I can maintain myself in the 40% category.

And if not, I always have the option of dying early.
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Old 07-15-2008, 07:47 AM   #4
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Well -- the fact that you read this and worry about it means you are less likely to be in the "outlive savings" category.

I read this article in the Washington Post when it came out a couple days ago and was distinctly unimpressed with its almost complete lack of detail. The best way to inoculate yourself against such information-free worry dispensers is to keep track of your own information and plans.

Quick, look over there! The market is plummeting! We're doomed, horribly horribly doomed! This has never happened before!
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Upon further review
Old 07-15-2008, 08:05 AM   #5
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Upon further review

So the study was "commissioned by Americans for Secure Retirement, a lobbying coalition for policies to help Americans retire."

Their web site is named Americans For Secure Retirement | Home but the address is paycheckforlife.com

Clearly a group of concerned citizens and altruistic businesses. I wonder what they propose to resolve this problem.
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Old 07-15-2008, 08:13 AM   #6
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I'm concerned - and have amassed almost enough social security to keep our cats fed. if they go to that great litter box in the sky early. Not sure being concerned will pay the bills, but i figure stressing over stuff might help me check out early, reducing the need for mass sums of cash, so that is a comfort. How many greeters can Walmart afford - wonder if i should get my application in before the rush?

Calm "want fries with that"? Loki
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Old 07-15-2008, 08:41 AM   #7
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The key point here is to be able to outlive your saving. As long as you are alive, what else do we want?
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Old 07-15-2008, 09:00 AM   #8
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Thanks, everyone----I knew you could help me keep this in perspective.

I agree, REW and Robert---there are differences between us and the people they are talking about.

Michael, the agenda that "Americans for a Secure Retirement" have is to make annuities more attractive by the following (appears on their website):

"We believe Congress should create incentives that encourage the use of retirement vehicles that pay a guaranteed lifetime income. Our proposal would work this way: An individual would not pay federal income taxes on one-half of the income payments from annuities that make lifetime payments. No more than $20,000 annually could be excluded. For a typical American in the 25% tax bracket, this would provide an annual tax savings of up to $5,000.
Such an incentive would involve a relatively modest investment of federal revenues. This amount does not reflect cost savings to public social-services programs that would be generated by the greater use of life annuities. Nor does it account for the salutary effects of a guaranteed income stream on the quality of life of millions of seniors"


This group must obviously have some ties to the insurance/annuities industry and think that if this tax reform took place, they would sell more annuities. Think this is the next subprime mortgage/"predatory" lending crisis in the making?


I understand and agree with enticing people to save more---but if the issue is that boomers who are close to or in retirement having saved anything/enough and don't have the ability/experience to save, I don't see how tax free annuity income is going to provide them with what they need/want since most won't have enough assets to buy a sizeable annuity....
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Old 07-15-2008, 09:04 AM   #9
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I don't see how tax free annuity income is going to provide them with what they need/want since most won't have enough assets to buy a sizeable annuity....
Hey - I'm not wanting to start an argument but if there is going to be somebody who is going to give me a "bye" on federal taxes on my SPIA income (purchased with tax advantaged funds - and yes, it is "sizeable") I'm willing to take it!

- Ron
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Old 07-15-2008, 09:13 AM   #10
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Hey, you folks are getting pretty good at looking into who produces all these fun statistics!

Also from their "about us" mission statement:

"Specifically, that means making it easier to secure a guaranteed paycheck for life through products like life-contingent annuities."

As far as the "three out of five", many people are forced to retire due to a medical or other condition that keeps them from working, and we've already seen well established data showing that only a small percentage of people have put aside anything more than a token amount for retirement.

Unfortunately, most of these situations result in people with inadequate savings to even consider purchasing an annuity.

But that wont stop these guys from using it as a stick to try to scare the other 2 out of 5...
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Old 07-15-2008, 09:13 AM   #11
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Hey - I'm not wanting to start an argument but if there is going to be somebody who is going to give me a "bye" on federal taxes on my SPIA income (purchased with tax advantaged funds - and yes, it is "sizeable") I'm willing to take it!

- Ron
Yes, Ron, but my point was that you, like most here, do have sizeable assets or are working towards this. How are those who they talked about who are 58 and have an average nest egg of $100,000 going to survive, even if the half the income from an annuity was tax-free?
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Old 07-15-2008, 09:41 AM   #12
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Yes, Ron, but my point was that you, like most here, do have sizeable assets or are working towards this. How are those who they talked about who are 58 and have an average nest egg of $100,000 going to survive, even if the half the income from an annuity was tax-free?
If the annuity (specifically an SPIA, as mine is) is purchased with "tax advantaged funds" (as mine is), would result in taxes not being paid on tax deferred funds (like roll-over 401k's and traditional IRA's).

That means that the annuity (again, speaking of an SPIA) would become "tax free" (like a Roth IRA).

It would be an advantage to anybody - even those folks that have "average" savings/investments for retirement. Their annuity distributions would be minumal on an annual basis and probably would put them in a low/no tax basis, anyway.

BTW, I purchased my SPIA at age 59, so I guess I'm within the "target age" of the article...

That what I'm speaking of ...

- Ron
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Old 07-15-2008, 10:03 AM   #13
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Originally Posted by rs0460a View Post
That means that the annuity (again, speaking of an SPIA) would become "tax free" (like a Roth IRA).

It would be an advantage to anybody - even those folks that have "average" savings/investments for retirement. Their annuity distributions would be minumal on an annual basis and probably would put them in a low/no tax basis, anyway.
- Ron
- It's not exactly an "advantage to anybody" is it? If the individual's (low) yearly annuity payouts would have resulted in no taxes given today's laws, then he doesn't benefit. So, only those who are above this income level gain an advantage.

- If Congress wants to accomplish the same thing without making the annuity execs rich, then why not just re-write the law so I can withdraw my Traditonal IRA sums tax free? If they want to assure that these payments are spread out in a fiscally responsible way , they could stipulate a max payout % based on expected longevity remaining--above this would be taxed at a high rate.

- And, if they do this, I'd appreciate a rebate on all the taxes I paid to do a Roth conversion years ago, since those taxes I paid would have been for nothing.
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Old 07-15-2008, 10:05 AM   #14
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Yes, Ron, but my point was that you, like most here, do have sizeable assets or are working towards this. How are those who they talked about who are 58 and have an average nest egg of $100,000 going to survive, even if the half the income from an annuity was tax-free?

Work till 75?
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Old 07-15-2008, 10:06 AM   #15
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If the annuity (specifically an SPIA, as mine is) is purchased with "tax advantaged funds" (as mine is), would result in taxes not being paid on tax deferred funds (like roll-over 401k's and traditional IRA's).

That means that the annuity (again, speaking of an SPIA) would become "tax free" (like a Roth IRA).

It would be an advantage to anybody - even those folks that have "average" savings/investments for retirement. Their annuity distributions would be minumal on an annual basis and probably would put them in a low/no tax basis, anyway.

BTW, I purchased my SPIA at age 59, so I guess I'm within the "target age" of the article...

That what I'm speaking of ...

- Ron
It looks like even these guys aren't asking for that much.

See paragraph C(i) one page 3. It looks like this change does not apply to qualified money. http://www.paycheckforlife.org/images/1010.pdf

That said, my recollection is that the tax treatment of non-qualified SPIAs is somewhat unfavorable.
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Old 07-15-2008, 10:08 AM   #16
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I understand and agree with enticing people to save more---but if the issue is that boomers who are close to or in retirement having saved anything/enough and don't have the ability/experience to save, I don't see how tax free annuity income is going to provide them with what they need/want since most won't have enough assets to buy a sizeable annuity....
Right, even if you believed the study, it doesn't support their proposal.
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Old 07-15-2008, 10:09 AM   #17
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- It's not exactly an "advantage to anybody" is it? If the individual's (low) yearly annuity payouts would have resulted in no taxes given today's laws, then he doesn't benefit. So, only those who are above this income level gain an advantage.
Not quite. I receive a part of my principal (never taxed) as a monthly part of my SPIA payment. That (along with earnings) makes the payment totally taxable (for Federal, but not state/local, where I live).

I could not afford to do any Roth conversions, since I don't have "other funds" to pay the taxes (I could say that's only for the "rich folks", but that might make you mad - sorry!)

Hey - I'm always looking to save taxes ... If some group is going to "tilt windmills" to save me a buck, I'm willing to listen...

- Ron
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Old 07-15-2008, 10:11 AM   #18
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Work till 75?

Don't think so...

- ?
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Old 07-15-2008, 10:13 AM   #19
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TPTB have figured out how to keep all those the baby boomers from retiring.


Their fear-mongering has come too late for me.

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Old 07-15-2008, 10:25 AM   #20
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NM

Annuity talk I should stay out of it
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