Running Out of Money in Retirement

About 25% of those who die at age 85 or later pass away with less than $10,000, including the value of their homes, according to a new study by the Employee Benefits Research Institute. It is consistent with work done previously by economists. The study shows that many people simply don’t understand the increase in longevity and aren’t planning for the long lives many people are living. There are a number of ways to avoid this fate. Put some of your nest egg in immediate annuities or similar assets. Maximize Social Security benefits. Consider using a reverse mortgage to generate retirement income. The details are here.

Social Security is crucial in the final years, when retirees are likeliest to run out of money. In the years before single people die, the EBRI study finds, they’re getting more than two-thirds of their income from Social Security. “It’s only Social Security that guarantees that you have an income until your last days,” said EBRI’s Sudipto Banerjee, the study’s author.

If relying on the government makes you nervous, save as much as you can while you’re working, research and scrimp for affordable insurance to protect against the costs of illness or long life, and pinch your pennies in retirement. It may not sound like a lot of laughs. But with all its joys, life is serious business, and you don’t want to be on the wrong end of it in old age.