AN OVERVIEW OF AMERICAN'S RETIREMENT CAPABILITIES. The following article from CNN describes the serious financial problems that the retiring 'baby boomers' will face. However, the amount of money that the authors suggest will be necessary to retire comfortably, is ludicrous ! They know absolutely nothing about living comfortably on a yacht, in the Caribbean. Read this CNN article, and then read the material we have developed, from FIRST HAND EXPERIENCE. signed Amethyst http://money.cnn.com/2007/07/30/pf/retirement/crr_ebri_research/index.htm?postversion=2007073103 Retirement at risk: Who's falling short New studies find shortfalls in retirement savings are significant in most age and income groups. By Jeanne Sahadi, CNNMoney.com senior writer July 31 2007: 9:54 AM EDT The Center for Retirement Research (CRR) estimates that 36 percent of high-income households - those with a median income of $117,000 - won't be able to live as well in retirement as they do today. Among middle-income households, 40 percent are at risk of having to downsize, while 53 percent of low-income households are likely to fall short. That hasn't always been the case. "We're at the tail end of the golden era of retirement," said CRR Director Alicia H. Munnell. In a report released Tuesday, CRR notes that only 20 percent of those who were between ages 51 and 61 in 1992 were at risk of falling short of money in retirement. Today, 32 percent are. Why the increase? Munnell points to the shift from traditional pension plans to 401(k)s. Plus, she notes, people are living longer, and Medicare and taxes will take a bigger slice out of Social Security checks. In another report released Tuesday, the Employee Benefit Research Institute (EBRI) and the Investment Company Institute showed that while 401(k) balances have increased, they are still low. For example, among long-tenured employees in their 50s who make between $60,000 and $80,000 a year, their median 401(k) balance in 2006 was just under $164,000. But a 51-year old who makes $80,000 but only has $164,000 in savings would need to put away 23 percent of his salary - or close to $19,000 a year - if he wanted to retire at 65, according to savings guidelines from Ibbotson Associates. That would give him enough money, in combination with his Social Security benefits, to live on 80 percent of his pre-retirement income minus his annual 401(k) contribution. That 23 percent is almost three times the average contribution rate (8.3 percent) among people in that age and income group. And it's twice the total contribution rate (11.3 percent) when you kick in a 3 percent employer match. Do It Now: Get on track for retirement CRR considers households to be "at risk" if your savings plus Social Security and pension benefits combined will fall at least 10 percent short of the income you'll need in retirement to support the same standard of living you enjoyed while working. CRR assumes you retire at age 65, annuitize your 401(k) savings and take out a reverse mortgage, where a mortgage lender pays you for your house in regular installments. Change any of these assumptions and the percentage of households at risk becomes considerably higher. "People enter retirement thinking that they'll be able to live exactly as they did before," Munnell said. But among households at risk, she predicts, they will find out they're spending more and their income is less than they thought. Munnell supports changes to employer-based retirement savings, such as auto enrollment in 401(k)s and the proposed auto IRA, whereby an employer that doesn't sponsor a 401(k) could let workers direct-deposit payroll deductions into IRAs. But those measures alone won't solve the problem, Munnell said. She believes a new retirement savings tier needs to be added on top of Social Security and work-based plans. Specifically, she thinks government should require workers to make small mandatory contributions from their paychecks. Of course, for families who aren't saving adequately because they're pressed financially, suggesting they save more isn't going to do much. Instead, Munnell thinks workers will come a lot closer to having adequate savings if they work until they're 66. Today, the average age men retire is 63 and for women it's 62. Meanwhile, a majority of Social Security eligible workers opt to take their benefits early, which means they receive a permanently reduced check. Retiring at 66 or later lets your investments to compound longer, ensures you get a bigger Social Security check and reduces the number of years in retirement. A CRR survey of early retirees found that 30 percent had retired early either because of job loss or health reasons. "So a lot of people wouldn't be able to take the prescription to work longer," Munnell said. "But 70 percent can." Top of page Why your Social Security check won't go as far as you think A retirement mistake Boomers should avoid Pension plans face more cuts Do It Now: Get on track for retirement http://money.cnn.com/2007/05/14/pf/retirement/nasi__report/index.htm?postversion=2007051508 Shrinking Social Security A new report says Social Security will replace less of your income than it did before, thanks to taxes, Medicare and the reality of hitting your 60's. By Jeanne Sahadi, CNNMoney.com senior writer May 15 2007: 8:39 AM EDT NEW YORK (CNNMoney.com) -- Since few of us actually like to save, here's some incentive: a new study says Social Security will replace much less of your pre-retirement income than it has for retirees in the past. To give you an idea of what that means to your wallet, consider a 65-year-old average earner making, say, $36,000 the day he retires. He might get about $14,000 in Social Security benefits after paying his Medicare premiums today. But if it were 2030, that same earner would pocket closer to the equivalent of $10,000. And the more you earn, the greater the difference would be. What you need to save How much to put away each year if you hope to retire at 65 with 80% of your pre-retirement income. Your current age Your current annual salary $ Your current savings $ SUBMIT 2007 Social Security benefits For earners who average: Benefits at age 65: % of pre-retirement income $16,700: $9,400 54% $37,200: $15,570 40% $58,900: $20,610 34% $87,800: $24,000 28% Source:The National Academy of Social Insurance based on data from Social Security Board of Trustees That assumes he retires at 65 and earned a paycheck for at least 35 years. In reality, though, a lot of retirees don't meet those criteria and end up with a smaller Social Security check, according to a report Monday from the National Academy of Social Insurance (NASI). That's because many retire at 62 - some by choice but many because they lost a job or can't work due to illness or injury. Women in particular tend to have fewer years in the work force since they may take time out to care for children and parents. Over the next 25 years, NASI says, the amount of pre-retirement income replaced by Social Security is expected to fall for a number of reasons: More retirees will have to pay income tax on their Social Security benefits. In 1983, lawmakers decided retirees whose total income was at least $25,000 (or $32,000 for those filing jointly) would have to pay income tax on a portion of their benefits. Those income levels are not adjusted for inflation. Also, while Social Security payments are adjusted for cost of living every year, Medicare premiums, which are paid out of your Social Security check, have been rising faster than inflation. Finally for those born in 1960 and beyond, the retirement age is 67 - the age when new retirees would be eligible for full Social Security benefits. So if a worker has to retire earlier and start collecting benefits - as many do - that will reduce his monthly paycheck. For example: In 2005, the average 65-year-old earner who retired got a Social Security check that replaced 39 percent of his pre-retirement income after accounting for Medicare premiums. His total income wasn't high enough to subject his benefits to income tax. But by 2030, it will be. So after deducting Medicare premiums and income taxes on a portion of his benefits and taking a reduced Social Security benefit because he retired two years before his full retirement age (67), Social Security will only replace 29 percent of what he used to earn. As a supplement to personal savings (and a pension if you're lucky enough to have one), Social Security checks can make it much easier to generate 80 percent of your pre-retirement income when you retire. But if the past is any guide, many people will rely heavily on Social Security, which currently accounts for half or more of the retirement income of 60 percent of retirees, according to NASI. Research is being conducted to come up with an Elder Economic Security Index for each state to reflect what retirees need to meet basic needs. In Massachusetts researchers found that to afford housing, food, health care, transport and personal items, a person would need income equal to 150 percent to 300 percent of poverty level, which is $10,210 for individuals and $13,690 for couples. With an expected swell in benefit-eligible retirees in the next 20 years, increased life expectancy, and a Social Security trust fund the government may have to go into debt to repay, actuaries and pension experts have been calling for changes to bolster the system's long-term funding. It's a debate that has been put on hold for now. For those in their 20's, 30's and 40's, you can bank on this: whatever changes are decided, you'll either end up paying more for the benefits promised or you'll receive less of them, or, possibly, both. Or you could just move to Luxembourg. According to data in NASI's report from the Organization for Economic Cooperation and Development (OECD), retirees in the tiny European nation get Social Security-like benefits that equal 100 percent or more of their pre-retirement income, ranking it No. 1 among all 30 member countries of the OECD, many of which fund government retirement benefits with contributions from workers, employers and general taxes, with typically higher tax rates than in the United States. By contrast, the U.S., where Social Security benefits are funded only with money from workers and employers, ranks in the bottom 10. Top of page Current vs. retirement income: How much will I need? 401(k) flubs: 5 to avoid Good job, big plans, no savings Did you retire by age 50 through hard work and smart planning to spend your time pursuing a passion or hobby? Living in the midwest or south? Tell us your story for an upcoming feature in Fortune Magazine. Send e-mails to chajim@fortunemail.com.