The markets are down, food and fuel prices are way up, and real estate is still reeling. The country is buried under tons of debt, and the long-term viability of Social Security, Medicare and the overall health-care system is uncertain. Throw in geopolitical concerns and the question mark that is the upcoming presidential election, and you have a heap of uncertainty making a lot of wealthy and not-so-wealthy folks worried about their financial future. Add it up, and the question becomes how secure are your clients' retirement plans?

If you believe the hype, the retirement picture isn't pretty. One recent newspaper article sported the headline, "Comfortable Retirement A Fading Dream For Many," while a recent report from a major financial services firm was entitled, "The Future Shock of Retirement." Meanwhile, several surveys find that a significant number of baby boomers aren't financially prepared for retirement. Perhaps that's not a surprise given that the nation's personal savings rate went from the low double digits in the early 1980s to negative territory in 2006, the lowest since the Great Depression.

But are things really that bad? Barclays Global Investors, publisher of the Future Shock research report, states that rosy forecasts for the great American retirement are based on unrealistic assumptions that current costs, benefits and retirement assets will remain relatively stable. According to Barclays, the chronic underperformance of defined contribution plans against traditional defined benefit plans, the likelihood of reduced Medicare benefits and general miscalculations of the amount of home equity available for non-housing consumption all mean that middle-income and wealthier groups could lose between 20% and 28% of their total wealth for retirement.

Sounds gloomy. "We're realistic," says Jonathan Cohen, senior strategist at Barclays and co-author of the report. For starters, Barclays sees the growing trend toward defined contribution plans, such as 401(k)s, as hurting retirement income because these plans trail traditional defined benefit pension plans by 2% to 4% annually. A big reason for the underperformance is that individuals, often with little investment knowledge or guidance, are in charge of their own 401(k) plans while professional money managers oversee pension plans. "You're your own chief investment officer" with 401(k)s, Cohen says, adding that's not a skill many retail investors possess. (Nonetheless, the Barclays report says defined contribution plans with default enrollment in life cycle funds could eventually shrink the performance gap.)

Furthermore, the 6.9% in federal income taxes that go toward Social Security and Medicare today might seem like chump change next to the 26.6% that might be required to sustain them by 2020. Cohen says people should expect to either pay more taxes to support these programs or expect fewer benefits, which in Medicare's case means more out-of-pocket medical bills.

As for real estate, the S&P/Case-Shiller Home Price Indices registered 9.3% average annual returns for the ten-year period through year-end 2007. People usually factor the full home-price appreciation into their overall wealth without taking into account the "imputed rent," or the cost associated with living in a home, that can deplete the actual amount of available home equity by roughly 40%, according to Barclays' model.

And the news isn't much better from the Center for Retirement Research at Boston College, which two years ago calculated that 44% of households are at risk of being unable to maintain their living standard in retirement. The reasons range from Social Security replacing a smaller percentage of preretirement income and people making mistakes with their 401(k) plans, to the nation's anemic savings rate and the combination of declining bond yields during the past 20 years and the possibility for lower equity returns going forward.

Earlier this year, after it added projected health-care cost increases into the mix, the Center for Retirement Research raised its percentage for those at risk to 61%. "As always," says one of its reports, "the percent 'at risk' is greater for those at the low end of the income distribution."

Wealthy Worries

The greatest risk for retirees is running out of money before they run out of time, a growing concern given that people on average are living longer. In theory, that should be less of a problem for wealthier individuals, as should doubts about their retirement portfolios in these unsteady times.

"If you're sufficiently wealthy, the current turbulent period is a minor annoyance," says Clif Helbert, principal for retirement planning at Edward Jones. But that doesn't mean even well-heeled folks aren't worried.

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