Sunday, December 28, 2008

Retire Early - Get Real

According to a survey from McKinsey and Co. of 3,000 retirees and pre-retirees, more than half of recent retirees decided to retire early. Surprisingly, the majority did not do this out of choice. Most did so due to adverse circumstances, such as job loss, caring for an ailing spouse, or their own health problems.

On average, these people are retiring in their mid-50s. With life expectancy for a healthy 65-year-old in the U.S. around 85 for men and 88 for women, that means some will need to fund their living expenses for 30 years or more.

And, unlike the generations that came before them, far fewer baby boomers will have traditional defined benefit pensions to help them. What’s more, research from professor Alicia Munnell, director of the Center for Retirement Research at Boston College, shows that Social Security will replace less than 30 percent of pre-retirement income by 2030. It’s clear that volatile markets are not the baby boomers’ only major challenge.