No Foolin: Retirement is Hugely Expensive

By Dian Vujovich

If you thought sending your little darlings to Harvard or Yale was pricey, that ain’t nothin compared with the high cost of living 30 or 40 years in retirement. While tuitions at Ivy League colleges easily average $35,000 a year or $140,000 for four years—that’s a measly fraction of what the cost of living while retired comes to.

In one of my first books I estimated that our retirement years weren’t going to be cheap-living ones and figured it was going to cost pretty much the same as pre-retirement living did. I was thinking like that before it was fashionable. Today, the people who do future retirement cost figuring basically agree.

A recent piece in from TheStreet.com titled”$1 Million Doesn’t Cut it for Retirement” polled 226 registered reps in a Scott Trade survey and found 71 percent thought $1 million wouldn’t be enough to make it through. Depending upon one’s age today, the story suggests that the average family would need a few million dollars at their disposable to live a good life during their heading-towards-the-end-of-the-parade years.

The piece suggests the average Generation Y family, those aged 18 to 26 today, will need to have saved $2 to $3 million for their retirements; Generation Xers (ages 27 to 42) about the same; and Boomers, (those 43 to 64), $1.5 to $3 million.

Forty-four percent of advisers thought $500,000 to $1.5 million was enough for the average senior family to have stashed in order to get by.

All scary numbers in times of economic uncertainties. And, sure to add worries and concerns to those looking ahead to save for retirement when not everyone’s paycheck today covers all of their monthly expenses.

Scary too are figures from Employee Benefit Research Institute, EBRI.

A recent report suggested that men would have to have between $102,000 and $196,000 set aside to cover their health care costs during their rusting years; women $137,000 to $224,000. That huge discrepancy between the males and females will be discussed at another time.

EBRIs stats on how much people think that they’ll need to have saved in order to live during retirement is equally as head-scratching: Nine percent thought that they’d need $1million or more; 24 percent, $550,000 to $1 million; and 29 percent figure $250,000 or less will do it.

Now let’s look at how much working folk have stashed away, again according to EBRI data: Only 12 percent questioned had $250,000 or more saved for retirement; 20 percent had saved less that 1,000 dollars; and 32 percent less than $25,000. (The EBRI fact sheet this data came from did not include the number of workers questioned or their ages in relationship to amount of money they had saved for retirement.)

If you then think about the cost of long-term or nursing home care, as Bette Davis said, “Old age ain’t no place for sissies.” To that I’ll add, “Or the financially challenged.”