Retirement & Financial Planning Report

While numerous studies in recent times have warned about lack of financial readiness for retirement by those approaching it, a closer look at the data shows that for some, at least, the level of "retirement risk" may be relatively small.

The Employee Benefits Research Institute, one organization that performs such calculations, has reported for example that about 44 percent of baby boom and Generation X households are at risk of running short of money in retirement, assuming they retire at age 65 and don’t draw on the equity of their homes until other financial resources are depleted. Retirement adequacy means having the financial resources to cover basic living expenses plus uninsured health costs.

"However, that includes a wide range of personal circumstances, from individuals projected to run short by as little as a dollar to those projected to fall short by tens of thousands of dollars," EBRI said in a recent analysis.

It took a closer look at Gen X households, currently about age 35-48, and found that about 19 percent will be substantially below (less than 80 percent) of what is needed for adequate retirement income, while about 31 percent will be close to the threshold for retirement adequacy—within 20 percent below to 20 percent above what is needed. The remainder, meaning half, will have at least 20 percent more than what is needed.

EBRI also looked at factors going into retirement income adequacy projections and found an especially strong positive effect of being eligible for a defined contribution retirement savings program such as the TSP. For example, among single females with no years of such eligibility left, 39 percent are in the most vulnerable category, but of those with 20 or more years of eligibility only 8 percent are in that category.