10/24/2011 11:20 am ET Updated Dec 24, 2011

Did You Retire This Year? Better Get Back to Work.

In her recently released book The Retirement Heist, Wall Street Journal reporter Ellen Schultz describes how employers were able to deprive their employees of pensions by switching to the more puny cash balance plans while not having to disclose the reduction in benefits.

For some reason Schultz doesn't devote a lot of time covering the even bigger pension rip-off that covers a much higher percentage of the population, the 401(k) plan.

Since employers aren't required to contribute enough to 401(k) accounts -- much less tell their employees the minimum they need to accumulate -- millions of Baby Boomers will have been convinced to retire this year. It won't take long for these savings to disappear: according to the Federal Reserve Board's Survey of Consumer Finances, the median amount saved in account and rollover balance for those age 55 to 64 was around a measly $86,600 in 2009 when the median wage for that age group is about $65,000. But even before the market slump in 2007 when the median balance was $103,600, that low six-figure number is less than twice the median Boomer salary when it needs to be 10-13 times that amount.

The scariest thing about retiring in this stagnant economy is that if you do realize you're running out of money, it will be tough to find a job that pays as well as the one you had -- much less find one at all. Here's why most retiring Boomers in the private sector will likely run out of money in five years or less.

The Only People Who Can Retire Started Saving In Their 20s

As actuary James Turpin demonstrated in calculating required contribution rates to 401(k) accounts, you can only afford to retire if you contribute at least 10% of your pay starting in your 20s and more than double that if you've waited until age 40. Very few participants fit into this category: according to Vanguard Group's How America Saves 2011, 59% of workers under age 25 don't save anything and neither do 39% of those between the ages of 25 and 34. Those who do participate in those age groups save at a rate of 3.9% and 5.4%. Even middle-age Boomers don't save enough; the average savings rate for those between 45 and 54 is 7.2%.

Even If Your Employer Offers A Pension, You Probably Won't Benefit From It

Not only are fewer employers likely to offer pensions -- only 10% of private sector employers do -- but even if yours does you likely won't be "vested" in, or "own" your benefits, if you leave your job less than five years after you start. At least that's true of regular pensions; the vesting period is typically three years for cash balance plans but the downside is that the benefits can be as puny as 401(k) plans.

As I pointed out in a previous post, most Americans are job hoppers; the average American born in the latter years of the baby boom worked for more than 10 employers between the ages of 23 and 44 alone, according to the Bureau of Labor Statistics. If you worked for 10 employers over a 21-year period, that's a little more than two years at each job.

When You Changed Jobs You Probably Tapped Into Your 401(k) Savings

On the other hand, job-changers who are only covered by a 401(k) plan get hurt for a different reason -- they may be "vested" in their account balances but too many of them shoot themselves in the foot by "cashing" out rather than rolling the money over. Only about 44% of those who changed jobs in 2006 rolled the entire amount over into a qualified plan, according to the Employee Benefit Research Institute. More than 26% used at least some of the money to buy a home, start a business or pay a debt.

Boomers Aren't Just Pension-Poorer Than Their Parents But Are Still Paying Off Mortgages.

As I pointed out in a previous post, unlike our parents, most of us boomers still have mortgage payments, whether it's a result of "trading up" to a McMansion or job changes. Since the rule of thumb is to spend no more than 4% of your retirement savings each year, somebody with a $100,000 mortgage who can only spend $400 a month can't afford the $700 a month mortgage payments. More than 50% of Boomers between the ages of 55 and 65 were paying mortgages in 2007 -- on average owing more than $140,000 -- according to the Survey of Consumer Finances. That amount is nearly three times what was owed by that age group in 1989, when only 34% were still making mortgage payments.

Do you think that you may be one of the few people who have saved enough to support yourself in retirement? Because you're either lucky enough to still be covered by a pension or you're part of a thrifty two-income household or you made big money in real estate? The only website I know of that helps you figure out how much of an income you can expect from your nest egg is run by a retired pension actuary, Ken Steiner. Here's a link to his website where you can find out whether you're on track. Go to the "spending calculator" link below the headline "Self-insuring your retirement."

For the rest of us facing dire retirement shortfalls, in my next blog I'll offer a retirement reform proposal that the "We are the 99%" American majority can support. Please stay tuned.