Your Finance: Is now the worst time to retire?

A new study from Bankrate.com and money manager

A new study from Bankrate.com and money manager Research Affiliates of Newport Beach, Calif., posits that the postwar generation could be retiring at a most unfortunate moment. (Credit: iStock)

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Add this to the growing pile of research that seems designed to scare baby boomers out of their Birkenstocks: A new study from Bankrate.com and money manager Research Affiliates of Newport Beach, Calif., posits that the postwar generation could be retiring at a most unfortunate moment.

"The baby boom may end with a whimper," wrote Chris Kahn, the Bankrate analyst who worked on the study. "Baby boomers may be leaving . . . [the workforce] at the worst time in a generation or more."

The study finds that today's low yields on "safe" investments like bank deposits, bonds and insurance products may not provide enough income for the boomers, who are expected to bust longevity records. The shift from pensions to employee-funded 401(k)-type accounts further leaves them less protected than their parents and grandparents.

Let's try for a little perspective, shall we? In the first place, there have been scarier times for Americans to retire. Before 1940 there was no Social Security. In 1960 the life expectancy for women was 73; for men it was 66. So while retirement may have been sweet, it was short. Until landmark retirement legislation passed in 1974, companies often required decades of loyalty before benefits were guaranteed, and then frequently laid off employees just before they were eligible to collect. In 1980, retirees may have had nice yields, but they were facing a 13.6 percent inflation rate.

So it's not really the worst time in history to retire. What it may be is the worst time to depend on bank deposits, bonds and insurance products to see you through a long retirement. Here are other strategies to consider:

Have patience. "Low returns don't persist forever," said Michael Kitces, research director of the Pinnacle Advisory Group in Columbia, Md.

Retire when you can afford to, said Sheryl Garrett, a Shawnee Mission, Kan., financial adviser. When is that? She tells clients to do this math: Add 1 / 25th of your savings to the amount of Social Security and pension benefits you expect to get in the first year of retirement. Is the total enough to support a comfortable lifestyle? Then you're good to go.

Be smart about spending during the first year of retirement. Kitces tells retirees they should aim to "take withdrawals low enough to be able to wait it out until returns revert to something more normal."

Invest like a young person. If you're going to live for 30 more years, you can take the kinds of investment risks that a long horizon allows.

Slide into retirement. Working part-time for a few years or developing a new way to make money on the side can ease the financial and psychological adjustment.

Save more. Kahn tells boomers to take advantage of the tax breaks for "catch-up contributions." Those allow anyone 50 or older to tuck extra money into 401(k) plans, individual retirement accounts and other retirement plans.

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