The Best of…Lack of Guaranteed Income Makes Retire Years Bleak, Study Says

Published July, 2008, Pawtucket Times

          Good health, combined with a strong work ethic, keeps sixty-nine year old Herman Brewster looking for full-time job in his later years.  The former Providence School Teacher now works part-time at the state’s Adult Corrections Institute (ACI) as a counselor, a place he once worked at for over 18 years.  Since 2006, Brewster has held a number of part time jobs since he left his full-time teaching position.  He believes a recession along with being almost seventy years old, hinder his chances of landing a full-time position with benefits.

            Herman and his wife, Madeline, are life-long Rhode Islanders who have raised two sons in their Eastside residence. Now empty nesters, they are faced with a lower household income.   With less household income, the couple no longer  takes annual vacations or trips, nor do they have discretionary income to purchase Native American pottery for their collection, a once favorite past time.

            Madeline, 57, a secretary in the Applied Math Department at Brown University, has now become the major breadwinner of the family, bringing health insurance benefits to the couple. 

Cutting Back Expenses

            “We have already cut back on our [household] spending,” says Herman, acknowledging that the couple’s belt tightening is due to skyrocketing gas, utility and food costs.  Although the couple is now eating out less to save money, they will splurge weekly by going out for Sunday breakfast, a less expensive alternative when compared to ordering from a lunch or dinner menu.    

            Herman acknowledges that he cannot even live comfortably now on his Social Security check.  “Fortunately between our two jobs we have not gone into our savings yet,” he says.  When retirement comes, probably in five years, he plans to take income out of his retirement annuity.

            While currently walking on a financial tight rope, the Brewster’s ultimate retirement will be made easier because of Social Security payments, combined with their guaranteed incomes, an annuity and pension.  According to a newly released Ernst & Young Study, others may not be so lucky, especially those living only on a Social Security check.

New Retirement Study Released

            According to the national economic study released by Ernst & Young on Monday, 54 percent of retirees in theOcean State entering retirement are at high risk of outliving their retirement savings. The study, commissioned by the Americans for Secure Retirement coalition, finds that in order to not outlive savings, the average Rhode  household will have to reduce their standard of living by a whopping 19 percent.  Both national and state-specific data were made available in the study entitled, “Retirement Vulnerability of New Retirees: The Likelihood of Outliving Their Financial Resources.”

            “Many Americans envision a leisurely retirement where their lifestyle continues much as before,” said Tom Neubig of Ernst & Young, in a press release heralding the release of the economic study.  “Our work shows that this is not a realistic expectation and that, with the current state of savings, retirees will have to cut back far more on expenditures than they had ever expected.”

            The researchers also found that retirees in Rhode Island are much better prepared to have a financially secure retirement if they have a guaranteed source of retirement income beyond Social Security, such as annuities and defined benefit plans. For example,Rhode Island residents who have a guaranteed source of retirement other than Social Security have an 18 percent chance of outliving their assets if they retain their pre-retirement standard of living.  However, those with Social Security as their only guaranteed income have an 80 percent chance of outliving their assets during retirement.

            “As a guaranteed source of retirement income, life annuities relieve the risks and burdens of managing a nest egg and can maximize savings’ value over the course of an individual’s retirement years,” adds Joe Reali, Chairman of the Americans for Secure Retirement coalition. “Life annuities are the only vehicle besides pensions and Social Security that provide a steady stream of income for life – a “paycheck for life.”

Other key findings of the study include:

            Almost three quarters of middle-income Rhode Island households seven years from retirement (near retirees) can expect to outlive their financial assets if they attempt to maintain their pre-retirement standard of living;

            Over half of middle-class Rhode   retirees can expect to outlive their financial assets;

            Almost nine out of ten near retirees and eight out of ten new retirees without an employer pension plan in Rhode Island are likely to outlive their assets;

            Married couples are more likely to outlive their financial assets, due to their longer joint life spans, than single households. Single females are more likely to outlive their assets than single males;

            Near retirees in Rhode Island would have to reduce their standard of living on average by 32% to reduce the likelihood of outliving their financial assets (failure rate) to only five percent;

            Finally, new retirees in Rhode Island would have to reduce their standard of living on average by 19% to reduce the likelihood of outliving their assets to only a five percent failure rate

            The national study should serve as a warning to many of the 77 million middle income baby boomers — it’s never too late to get your financial house in order.  Guaranteed sources of income can be instrumental help you maintain your pre-retirement standard of living.

            Herb Weiss is a Pawtucket-based freelance writer who covers aging, health care and medical issues.  This article was published in July 2008. He can be reached at


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