Retirees need to save, too

The economic news has been bleak for retirees and near-retirees over the past decade: Two recessions and two bear markets. The Standard & Poor's 500 index sporting an average annual return of 2.72% over the past 10 years. A one-third decline in home values since the market peaked in 2006. Too little set aside in 401(k)-type retirement savings plans. High odds that the federal government's debt-and-deficit negotiations will eventually lead to cutbacks in Social Security and Medicare for older boomers.

The response to the bleak message is clear. First of all, aging Americans are going to have to work longer.

They may say goodbye to their current employer when they reach retirement age, but they will continue to work and earn an income. Secondly, we're all under pressure to delay taking Social Security as long as possible. For every year you wait from age 62 to age 70 you earn an 8% in benefits increase. Last, you need to save even in job-tirement.

These results are reflected in a SunAmerica survey released on July 12, Retirement Re-Set Study: Redefining retirement post recession.

One survey result by the large insurance and retirement services company stood out for me: The cost of family ties. The survey reports that that "pre-retirees must balance their retirement plans with the possibility of having to financially and emotionally support aging relatives, adult children, grandchildren, and siblings."

For instance, nearly half of respondents say they will need to provide financial assistance to family members and 70% of these respondents expect to offer financial assistance to their adult children. Think about it. Your daughter loses her job. You're going to help out. Your son can't meet the community college retraining program bill. You'll make sure it gets paid. (So much for an inheritance, too.)

I don't think the answers to the survey question about family ties is surprising. However, we do tend to systematically underestimate the odds of a financial surprise in retirement. Several months ago I had a correspondence about retirement with Henry "Bud" Hebeler, the founder and driving force behind analzenow.com

"Every single one of our friends has had some serious financial surprise during retirement that was completely unseen," says Hebeler. "By far, the most common unforeseen thing has been adult daughters getting divorced and trying to support several children. Others, including ourselves, had to provide major financial help to our parents."

People are struggling to save more and pay down debts despite a near double-digit unemployment rate and little wage gains. An emergency fund isn't only for young families. It's a necessity even for the retired.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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