Second of two parts

DETROIT — No matter how you run the numbers, many baby boomers are looking at a far less glamorous retirement than all those delightful TV ads might suggest.

Dreaming of tai chi classes on the beach? Kayaking in the Grand Canyon? Or maybe cruising off into the Caribbean sunset?

The reality is that at least half of all baby boomers — about 76 million people ages 40 to 58 — will be in a serious cash crunch when they stop working.

The first boomers turn 62 and are eligible to tap Social Security in 2008. Yet a recent New York University study found more than half of all households closing in on retirement won't be able to string together enough money — through pension checks, 401(k)s, other savings and Social Security — to cover 75 percent of what they're making now.

The 75 percent standard is a pretty basic goal for retirement planning. You might even feel you need more money to live. But ask yourself this: Could you live on half or less of what you're making today?

Workplace experts have warned companies to prepare for all sorts of calamities when this giant generation walks out the door all at once. But that worry may be misplaced.

Of far more concern will be the tens of millions of boomers who won't have enough money to comfortably retire when they are ready.

Faced with the choice of staying on the job, or living on a lot less money, many will likely keep working well into their 60s and 70s.

Some will choose to remain in their jobs. Others will go into semi-retirement, taking whatever part-time or contract work they can find to maintain their standard of living.

"What's true today is that the uncertainties surrounding retirement are far greater than they were for the previous generation," said Olivia Mitchell, professor of insurance and risk management at the Wharton School of the University of Pennsylvania.

"I think the baby boomers are going to redefine retirement — and it's going to include work much more often than in the past."

Mitchell, 51, is a boomer and she plans to keep working as long as she can, too.

"I'm not going to retire," she said.

Hit from all sides

Boomers will get crunched on a bunch of fronts. They'll pay more for health care in retirement than their parents did, they'll most likely get less money from Social Security, and many won't see a traditional pension check.

Companies are cutting back on traditional pensions, and they're getting stingier with health-care coverage for retirees, too.

The reality is that someone else — Uncle Sam or their old employers — won't be picking up most of the boomer bills in retirement. Boomers will need to turn to their own savings — or develop a plan to keep working.

The boomer generation needs to get ready for "the largest do-it-yourself project this country has ever seen," said Andrew Tappe, senior vice president for Fidelity Brokerage Services in Boston.

And they're not ready yet.

"Clearly, boomers are not going to have enough money to meet basic expenses," said Steve Blakely, editor and communications director for the nonprofit Employee Benefits Research Institute in Washington, D.C.

One study suggests America's boomers face an income shortfall of at least $45 billion in 2030 alone, when boomers will range from ages 66 to 84.

Many will have a tough time covering basic living expenses as well as the high-cost, late-in-life expenses for nursing-home or home-health care, according to the Employee Benefit Research Institute.

Those most at risk are single women in the lowest income groups, who don't make enough money to save much, if anything, for retirement.

And of course, it hasn't helped that many middle- and upper-income boomers tend to be bigger spenders than their parents.

So, they'll be juggling more debt and extra bills in retirement. Some boomers could be paying $1,200 a month for their mortgage in their golden years.

It hasn't helped matters that as many older boomers inched toward retirement, their 401(k) investments got smacked by one of the worst bear markets ever.

RASHAUN RUCKER / KNIGHT RIDDER NEWSPAPERS Fred Granata, 42, of Allen Park, Mich., who repairs workout equipment for Life Fitness, says: "Man, I'm going to have to work until I die."

Many who were saving for retirement saw five-figure losses in their 401(k)s, stocks and mutual funds.

Stock-market bubble

Even many thrifty boomers say they can't afford to retire as soon as they once dreamed.

Dave Peters, 55, says that during the stock-market boom in the late 1990s he thought that he'd retire at age 57 or so. He had been a contract worker in the computer field for many years. He has worked for the past nine years as a performance analyst at Ford Motor Co.'s information-technology complex, called iTek, in Dearborn, Mich.

Peters imagined a semi-retirement of sorts. He planned to pick up some extra part-time computer work at a small company and bank on his investments. He also would qualify for a Ford pension.

Then, his mutual funds took a big hit.

Now, he's not even planning to retire at 62 or 65.

He has no intention of leaving his job at Ford in the next few years, if he can help it.

"I don't expect to retire," Peters said. "I'm going to work until I die. They'll find me at my desk."

Peters is only half joking. He hasn't given up on saving for retirement. Unlike many boomers, he's setting aside the maximum amount possible each year in his 401(k).

"It's a great way of saving: If I put it away, I won't miss it," Peters said.

Other boomers aren't saving anywhere close to $10,000 or more a year for retirement.

Let's start out looking at workers age 35 to 44; the group includes some younger boomers.

The median savings in retirement accounts — meaning half the group has more and half has less — was $28,500, according to the latest data from the Federal Reserve's 2001 Survey of Consumer Finances. These retirement accounts include 401(k)s and Individual Retirement Accounts (IRAs).

If you look at workers age 45 to 54, the median amount in retirement savings goes up to $48,000.

And workers age 55 to 64 had a median savings in retirement accounts of $55,000.

Granted, the numbers are better than they were in the previous survey for 1998. Then, for example, the median for 45- to 54-year-olds was $37,000.

But a nest egg of $50,000 or less won't get you far in retirement, especially if you've already got plenty of bills to pay.

Consider this: It's possible that a retired couple could pay $1,200 to $1,400 a month to cover their medical insurance if they retire before age 65 and their employer does not offer medical insurance in retirement, according to Ron DeStefano, senior vice president and consulting actuary for Aon Consulting in Baltimore.

Once they hit age 65 and can go on Medicare, they might pay $400 a month for additional medical coverage in retirement.

Health-care coverage

One survey of investors who are not retired yet found that their biggest concern about retirement is how much health coverage they'll have after retirement.

About 43 percent of investors in Detroit are worried about health-care coverage in retirement, according to the Gallup Organization survey for UBS, a financial-services firm. Nationwide, about 44 percent of investors had similar fears.

By contrast, roughly 10 percent saw boredom as a major problem in retirement.

The investors surveyed last summer have at least $10,000 in investable assets. Throughout the United States, the sample involved 612 investors who had not yet retired.

"By and large, most boomers aren't prepared," said Mary Farrell, managing director and senior investment strategist for UBS Wealth Management in New York.

Farrell, who has been giving talks across the country on retirement savings, says boomers need to save more money because they need to plan for higher health-care costs in retirement.

On top of that, anyone saving for retirement needs to understand that many prices, not just health care, will be higher in 20 or 30 years, thanks to inflation.

But here's the most amazing response out of the UBS survey: About 89 percent of all U.S. investors surveyed expected to work after retirement. Only about 12 percent of retirees work now.

When you talk to boomers, many say they'll need to keep working — or postpone retirement — because they'll still need to put their children through college. Or they don't work in jobs that have traditional pension plans. Or they don't want to give up spending money on the good life now.

Alan Hull, 51, says he's not looking to retire from his information-technology job at Ford soon. He lost about $20,000 during the Internet bubble.

But the real reason he doesn't want to retire early is that he enjoys spending money.

He took his girlfriend to Tahiti four years ago. This year, they went to his time-share spot in Cancún, Mexico.

And Hull, who began working for Ford in 2001, enjoys buying his toys. He's spent several thousand dollars on a home-entertainment system.

"I'm not looking to quit working anytime soon," Hull said.

Looking ahead

Steven Siman, 56, an estate-planning attorney in Troy, Mich., said he's not looking to retire in the immediate future because he has a son in sixth grade. He'll be in his mid-60s when he'll be dealing with his son's college tuition bills.

Siman, who is divorced, is self-employed and must cover his own retirement and medical bills.

He doesn't have a lot of toys. But he has a new mortgage and must already put aside $1,200 a month for medical coverage. He saves about 25 percent of his pay for retirement.

And he says he's not sure he could live well on 75 percent of his income in retirement, as some financial planners suggest.

He thinks he'd need more money. He wants to travel and do things he didn't have time to do while he was working.

"I'd love to go to the Badlands. I'd love to travel the trans-Canadian rail. It goes all the way across Canada. It's a beautiful trip," Siman said.

And all those kinds of things cost a lot of money.

The scary part is that some retirement experts question whether boomers will be able to patch together enough money in retirement to cover the essentials.

Take a couple that made $50,000 a year during the working years. If they're retired now, there's a good chance that a pension, Social Security benefits and savings are enabling that couple to get their hands on at least $37,500 a year in retirement.

Today, roughly six out of 10 retirees are able to replace at least three-fourths of their yearly wages once they retire, according to Edward Wolff, a New York University economist.

Yet Wolff's research suggests only 48 percent of older households headed by people age 47 to 64 will be able to replace 75 percent or more of their pre-retirement income.

Why the falloff?

One reason: Many boomers won't be able to depend on a traditional pension.

Fewer than half of the 47- to 64-year-olds have traditional defined pensions. Wolff says 20 years ago, about two-thirds of retirees had a traditional defined pension plan.

"There's no law that says we all have to have a comfortable retirement, and it may be that a large percentage of the next generation [of retirees] won't," said Patrick Purcell, specialist in social legislation for the Congressional Research Service for the Library of Congress.

Another reason for trouble: Social Security benefits have already been cut for younger boomers.

Today, the average wage earner can expect Social Security benefits to replace about 40 percent of their previous earnings.

But younger boomers should expect that Social Security might replace only 25 percent to 30 percent of their income in retirement, said Alicia Munnell, director of the Center for Retirement Research at Boston College.

That takes into account cutbacks that are already in place — and factors in some extra cuts in the future that are expected to take place to shore up the system.

Today's youngest boomers, the 40-somethings, also are among the most vulnerable to a slew of cutbacks in retirement benefits.

It's not going to be a pretty picture for many boomer retirees.

"They're going to have to scramble to make ends meet," Munnell said.