How to Keep Spending Up in Retirement

Last Updated Dec 19, 2009 12:31 PM EST

A resounding 95 percent of Americans say they have absolutely no intention of spending less in retirement, according to a new Schwab survey. I'm not exactly surprised at the results. Who wants to think about a lower standard of living at any juncture, let alone in retirement? But if you're hell bent on keeping up the spending, you really need to stay focused on what it will take to achieve your goal.

A new Urban Institute paper says in the wake of the 2008 market crash roughly one in five of us could see our retirement income fall if the recovery plays out along the lines of what happened after the 1973-74 recession when the S&P 500 averaged an average annual real loss of 2 percent through 1982.

If we get something similar to that, the researchers conclude " incomes at age 67 are projected to decline on average by 11 percent, 15 percent, and 10 percent for pre-boomers, middle boomers, and late boomers." That's not to say we are destined for a post-74 replay. But these days it seems prudent to pay attention to risk. And a period of slow recovery could be costly risk. Moreover, it's not like we all had big fat projected retirement incomes before the crash anyway.

Work It Out So are the 95 percent dreaming? Not necessarily. There are all sorts of levers you can push today to make the numbers work so you can maintain your spending levels in retirement. But you have to be willing to push 'em.

Start by following Charlie Farrell's advice for how to make 2010 a great year for your retirement portfolio. I'd also throw in: stay focused on what it really will take to retire in the style you envision. I see growing evidence that many of us are slowing creeping back to our pre-crash way of thinking now that the panic of the bear market has been partially healed by the 60 percent rebound since the March lows.

In the same Schwab survey, the percentage of baby boomers who say they intend to delay retirement has fallen from 61 percent last quarter, to just 40 percent today. Clearly the sense of urgency is abating. That could be a dangerous development. Sure, it's nice that portfolios have recovered recently; but it's not as if you've likely made great advances either. Fidelity's 401(k) trends report through September points out that the 10-year average personal rate of return for 401(k) accounts (excluding contributions) was just 1.9 percent. Clearly, boosting what you can save, and making sure you do everything possible to keep your career on a forward trajectory remain as timely today as they were in the depths of the bear market.