Bleak retirements for 150 million?

What's even more depressing is that those estimates haven't factored in the cost of nursing homes, assisted-living facilities or home health aides. And those costs are staggering.

According to the MetLife Mature Market Institute, it costs $69,000 a year for a semiprivate nursing-home room, $35,628 a year for a unit in an assisted-living facility, $19 an hour for a home health aide and $61 a day at an adult-day-care center. Where's that money going to come from?

Retirement expenses

Retirees and would-be retirees are also right to fret about maintaining their standards of living. Consider, for instance, these numbers: The median household income (half above, half below) in America is $48,451, and the average is $65,527, according to the U.S. Census Bureau. But in retirement, income falls dramatically.

The average total income for those 65 and older in America is $25,610, and the median is a meager $16,770, according to EBRI Notes, a publication of the Employee Benefit Research Institute. That means retirees are living on roughly one-third of their pre-retirement incomes. And that's a far cry from the 70% to 80% that income replacement experts suggest Americans need to maintain their pre-retirement standards of living.

Besides not having the incomes to maintain their former standards of living, retirees will face expenses, such as health care, that are certain to rise faster than the average rate of inflation. According to the 2005 Consumer Expenditure Survey, retirees spent 13% of their incomes on health care, on average.

Sources of retirement income

So where do retirees get their incomes once in retirement? Again, the numbers are depressing (and deceiving). On average, retirees get 39.8% from Social Security, 23.7% from earnings, 19.4% from pensions and annuities, 15.4% from assets (IRAs and the like) and 1.9% from other sources, according to EBRI Notes.

But the composition of the incomes varies dramatically. Retirees in the bottom fifth of income -- those with less than $8,261 in 2006 -- got 87.6% of their money from Social Security. Retirees in the top fifth of income -- those with greater than $34,570 -- got 36.4% from earnings, 22.6% from pensions, 20.5% from assets and just 18.5% from Social Security.

The moral of story

If you are among the 150 million who are saving little or nothing for retirement, now would be a good time to do so.

If you are among those who aren't worried about health-care costs, inflation or maintaining a standard of living in retirement, now would be a good time to start worrying.

If you are among those who worry about retirement risks, now would be a good time to do something about it. Set aside money for health care, for instance.

And if you are among those who don't know what your sources and composition of retirement income will be, now would be a good time to figure that out. After all, waiting to see how things might work out isn't the world's best plan.

This article was reported and written by Robert Powell for MarketWatch.

Published March 28, 2008

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