WASHINGTON — Nearly three out of five middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles, a new study from Ernst & Young has concluded.
The study, set to be released Monday, finds that Americans will have to drastically reduce their standard of living before retirement to live comfortably, or even avoid destitution, later in life. Middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize their chances of outliving their assets, the study found. Workers seven years from retirement will have to cut their spending by even more — 37 percent.
"People are going to have to adapt in a number of ways that they weren't anticipating or hoping for," said Tom Neubig, national director of the Quantitative Economics and Statistics practice at Ernst & Young. "I think a lot of people are hoping to maintain roughly the same standard of living after retirement. Our study suggests they are going to have to make some changes."
"Most people, if they look at their life expectancy and they think they will live to 90, they are nuts to retire at 60. They're going to be living in poverty at 80," said Peter Morici, an economist at the University of Maryland. "I think it's a wake-up call to baby boomers to get serious about getting their houses in order."
The study was commissioned by Americans for Secure Retirement, a coalition of more than 50 organizations representing women's, small-business, agricultural, Hispanic and African-American groups, among others. It looked at married and single near- and recent retirees at three pre-retirement income levels: $50,000, $75,000 and $100,000.
Retirees would be much better prepared if they had a guaranteed source of retirement income beyond Social Security, the study concluded. Married couples relying on income aside from Social Security and making $75,000 at retirement have a 31 percent chance of running out of money if they maintain their lifestyles, the study pointed out. But those who rely solely on Social Security have a 90 percent chance.