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It's No Fun Getting Old When You're Worried About Running Out of Money

Pamela Yellen
The shift from guaranteed pensions to 401(k)s and IRAs has robbed many of true financial security.

One of the most sobering pieces of journalism to come out last year was a Washington Post article titled, "The New Reality of Old Age in America." It detailed the financial vulnerabilities of Americans over age 65 and how "people are living longer, more expensive lives, often without much of a safety net."

Related: 7 Wealth-Killing Risks That Threaten Your Retirement

"As a result, record numbers of Americans older than 65 are working -- now nearly 1 in 5," the article stated. "That proportion has risen steadily over the past decade, and at a far faster rate than any other age group."

At an age when many Americans have traditionally looked forward to enjoying travel, visiting grandchildren and pursuing other relaxing retirement pastimes, more find themselves working longer and harder, often at menial, low-wage jobs.

The upshot? It's no fun getting old when you have to worry about running out of money or are forced to work until you die. In fact, polls routinely show that older people are more worried about running out of money than they are of dying.

How did we get here?

Only a few generations ago, company-sponsored retirement pension and health plans were a standard benefit, giving workers an incentive to loyally stick with one company until they reached retirement age. Then, along came popular but massively problematic 401(k) plans to replace those guaranteed lifetime pensions.

The only problem, as millions of workers have discovered, is that the money promised by 401(k) plans, IRAs and other government-sponsored retirement scams isn't guaranteed. Now, it's "You're on your own; good luck with that."

It's as if we have (as retirement security specialist Teresa Ghilarducci put it) "moved from a system where everybody went to the dentist to a system where everybody now pulls their own teeth."

People are forced to guess how long they might live and try to budget accordingly. But most lack true long-term financial security. They know that one big health problem or time in a nursing home could wipe out all they have struggled so long and hard to save.

Related: 3 Retirement Pitfalls and How to Address Them

More sobering facts:

Almost 20 percent of Social Security recipients age 65 and older have no other source of income. For another 33 percent, Social Security accounts for 90 percent of their income.

Social Security cost of living increases have boosted benefits by 43 percent ince 2000, but the typical senior's expenses have soared by 86 percent during that same period.

The median value of retirement accounts for those between 55 and 64 is only about $135,000, according to the Federal Reserve.

It gets worse . . .

A study by the National Institute on Retirement Security finds that the typical working household still has virtually no retirement savings. And Americans will be getting a lot less out of their 401(k)s and IRAs than they think.

"Based on 401(k)-type account and IRA balances alone, some 92 percent of working households do not meet conservative retirement savings targets for their age and income," the NIRS study states.

It's obvious that the shift to do-it-yourself retirement planning has enriched Wall Street far more than the typical saver. Unfortunately, things are not much better for small business owners and entrepreneurs. About a year ago, another report, by the National Institute on Retirement Security, found that only a fraction of the nation's 28 million small business owners were prepared for retirement.

What's the solution?

Is it to "keep investing heavily in the stock market and hope the bulls run forever"? No, because this is gambling, pure and simple.

I'll say it again: Wall Street crashes have wiped out 50 percent or more of the typical investor's hard-earned savings twice since the year 2000. Hoping that this time will be different -- that this surge in prices will go on indefinitely -- is a fool's hope.

The solution for true financial security isn't to keep doing the same thing over and over, hoping for a different result. It's to save more of your hard-earned money in financial vehicles where both principal and growth are guaranteed.

Such vehicles do exist. And they can allow you to build your savings for retirement while doubling as an emergency fund you can tap for life's major expenses along the way. For entrepreneurs and business owners, this method can provide a source of financing and capital which protects you from having to beg from banks.

Related: 4 Ways to Avoid Crucial Money Mistakes and Save for Retirement

Yes, it's no fun getting old when you're worried about running out of money. But that doesn't have to be your future. It's a matter of thinking outside the box of conventional financial wisdom that would have us put all our eggs in Wall Street's basket. You can take control of your own financial security -- and gain the peace of mind that comes with knowing you won't have to work until you drop.