(Dow Jones) If your clients are baby boomers, the odds are high they'll exhaust their retirement savings after ten or 20 years of retirement, according to the latest Retirement Readiness Rating report released recently by the Employee Benefit Research Institute.

Nearly half of older boomers-those now aged 56 to 62-and some 44% of younger boomers-aged 46 to 55 now-are at risk of not having sufficient income to pay for basic retirement expenses and uninsured medical expenses, according to the study.

The study, which assumed that boomers would retire at age 65, also found that lower-income retirees are most likely to run out of money after 10 and certainly 20 years of retirement, while higher-income retirees are least likely to run out of money.

To wit: 41% of those in those lowest income quartile are likely to run short of money after 10 years of retirement, and 57% after 20 years. Meanwhile, just 5% of those in the highest-income quartile will run out of money after 10 years, and 13% after 20 years.

So, what to make of this study?


Run Out Of Lifestyle, Not Money

In reality, most Americans don't run out of money, they run out of lifestyle. As they age and spend down their assets, they typically reduce their living standard.

"For the most part people do not completely run out of money when our software says they will," said Stephen L. Deschenes, senior vice president and general manager for the annuities division of Sun Life Financial's U.S. operation.

"They do not run full speed like Wile E. Coyote off the cliff and only then realize that they are out of terra firma. Rather they take action either to spend less or work more or some combination to forestall running out," he said.

Other research finds a high likelihood that Americans will be forced to spend less. After factoring in health-care and long-term-care costs, the National Retirement Risk Index, or NRRI, produced by Boston College's Center for Retirement Research, finds that some 65% of American households are at risk of not having enough money to maintain their living standard in retirement, according to the NRRI.

Work Longer

A point to consider about EBRI's study: It assumes boomers will retire at age 65. That's not likely to happen. Most boomers, assuming good health, likely will work past age 65, according to Sun Life Financial's Unretirement Index.

According to that index, the portion of Americans who plan to work past age 67 is higher than ever: a record 55% plan to work full- or part-time, up from 52% one year ago. And the percentage planning to work full-time past age 67 reached a new high of 28%, up from 19% one year ago.

There was also a sharp rise in workers who said they will need to work longer than planned because of the economic crisis, according to Sun Life. Sixty-five percent said they will have to work more than one year longer, compared to 54% in the last index. And 27% said they will have to work more than five years longer, compared to 24% in the last Index

Why are they working longer? To earn enough money to live well and maintain their standard of living, according to Sun Life.

Truth be told, many Americans are already working longer, be it to maintain their standard of living, stay mentally engaged or for the health-care benefits. Americans aged 65 and older in the upper income quintile now get about 40% of their income from working.

Save More

But the bottom line from all these studies: Saving more and perhaps reducing your standard of living now might be the only way to be reasonably certain you'll enjoy any standard of living later on.

According to EBRI, if you want to be one of the nine in 10 households that maintains its standard of living in retirement, younger boomers in the lowest income quartiles will have to save, on top of what they already save, an additional 25% of compensation every year, while those in the in the third income quintile will have to save an additional 15% per year. Those in the highest income quartile catch a break and don't have to save any more.

The story is a little better for older boomers, but not much. Those in the lowest income quartile have to save an additional 25% per year, while those in the second income quartile need only save 15% more and those in the third income quartile need save just under 5% more. As with early boomers, late boomers in the highest income quartile catch a break again. They don't have to up their savings to have a 90% probability of maintain their standard of living in retirement.

The moral of EBRI's and other's research? Earn lots of money now and save as much as you can. Because the odds are against you otherwise.

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