Category: Personal Savings
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The good news, according to a new study, is that you are likely to outlive your expectations. The bad news is that you might also outlive your retirement.

About 25 years ago, the Brookings Institution posed a question to a large sampling of Americans older than 50: What are your chances of living to the age of 75? Of those who gave themselves a 50 percent chance of reaching 75, about three-quarters made it. Of those who said they had no chance of making it a ripe old age -- about 7 percent of the respondents -- roughly half of them did live that long.

In other words, Americans tend to vastly underestimate how long they will live, and that means they vastly underestimate how much money they will need in retirement. Individuals do not fully understand the longevity risk they face, wrote Benjamin Harris and Katharine G. Abraham, the studys authors. Or, as Christopher Ingraham wrote for The Washington Post: As a society, we are somewhat obsessed with the risks of dying -- from car crashes, cancer, terrorists, Ebola, or any of the thousands of mortal terrors that haunt our nightly newscasts. But were less accustomed to consider the risks of living long -- of outliving our retirement savings.

Concerns about the state of retirement are nothing new. For years, there has been much hand-wringing about the long-term solvency of the Social Security system; most individual retirement plans have moved away from company pensions and toward self-directed plans such as a 401(k); and the economic meltdown of the past decade has altered retirement plans for older workers, younger workers and everybody in between. Time Magazine presented a cover story in June under the headline, 2030: The Year Retirement Ends.

So, the Brookings Institution study could be chalked up as one more reason to worry about retirement, but it also should serve as a reason for a personal reassessment. To start with, if your company offers a 401(k) program, you should enroll in it. Financial experts recommend contributing enough to glean the maximum in matching funds -- essentially receiving free money that will grow over time.

But perhaps most important is a need for Congress to address the future of Social Security. Republicans long have campaigned on a platform of being fiscally responsible, and their newly increased power in Congress will provide them with an opportunity to demonstrate that wisdom. If nothing changes, analysts say that by 2033, the Social Security Trust Fund will be able to pay recipients only 77 percent of the funds that have been promised.

In an age of economic uncertainty in which many people are managing paycheck to paycheck, the thought of long-range savings is difficult for some to embrace. But the need is critical. The Employment Benefit Research Institute calculates that 41 to 43 percent of Americans are at risk of running out of money in retirement, and similar studies have come up with even more dire projections.

All of which brings us back to the Brookings study. If most people are living longer than they expected to, then it is time to reconfigure your individual predictions. With life-spans increasing and Social Security on shaky financial footing going forward, Ingraham wrote for the Post, people are going to be depending more on their personal savings and retirement accounts to support them through old age. In order to assess how much money well actually need, we first need to have a realistic sense of how long well live.