NCPA - National Center for Policy Analysis


March 31, 2006

Ever wonder how your retirement will pan out? Just take a look at your "golden years," say Andrew Rettenmaier and Thomas Saving of the Private Enterprise Research Center (PERC).

According to an analysis of life expectancy, expected earnings, remaining years of work, wealth accumulation and government transfers, baby boomers are living longer and have already begun their transition to more leisure time and less work; but the biggest issue for potential retirees is whether they have planned well enough for their future, say Rettenmaier and Saving:

  • The average annual Social Security benefit the oldest baby boomer can expect, if they retire at 66, is almost $16,000.
  • A retiree would need $250,000 to annuitize at retirement to replicate that amount; that amount would probably have to be higher in the private annuity market because of the higher life expectancy of individuals.
  • If they used 95 as their life expectancy rate, retirees would have to set aside $300,000; coupled with Medicare benefits, the total value of elderly entitlements may exceed $500,000.
  • Currently, a third of retirees draw pensions other than Social Security, but this will decline as more firms adopt defined contribution plans.

However, there are several things to do to prepare for retirement, say Rettenmaier and Saving:

  • Plan for the long-haul; there's a 10 percent chance that you will make it to your 90s, so plan accordingly.
  • By the time you retire, you should have retired all of your debts.
  • Determine your annual spending and how it will likely change once you retire, then add up your monthly income from pensions, retirement accounts and Social Security.

Furthermore, planning now is critical and will help you avoid the surprises of waiting until it is too late to adjust, say Rettenmaier and Saving.

Source: Andrew J. Rettenmaier and Thomas R. Saving, "Planning for Your Golden Years," Private Enterprise Research Center, January 2006.


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