More dismal news on funding your retirement

Liz Pulliam Weston at MSN Money delivers more bad news on the changing outlook for funding a decent retirement and the news isn't very good. In bullet-point form, here it is:

• Get help
• Don't bail on the stock market
• Consider putting off retirement
• Consider part-time work
• Trim or freeze withdrawals in bad markets
• Set aside a cash cushion
• Keep your home equity on tap

Yikes! That almost sounds un-American. A few more details:

How to retire in bad times
These are the times that try retirees' souls -- and those of near retirees as well.

Big drops in the stock market obviously can devastate retirement accounts. But the people most at risk are those who have just retired or who are about to retire.

That's because dipping into a shriveled nest egg can dramatically increase your chances of running out of money. The cash you take out won't be there to earn future returns when the market recovers; what's left would have to earn extraordinary gains to make up for the double-whammy of market losses and your withdrawals.

"It's the mathematics of compounding," explains Taylor Gang, a wealth manager with Evensky & Katz, one of the country's leading financial-planning firms. "It grows your money on the upside but shrinks it on the downside. If you have a 50% loss, you need a 100% gain to get back to the same point."

How bad can it get? Pretty bad:

* Studies by mutual fund giant T. Rowe Price (.pdf download) found that people who tap the recommended 4% of their nest eggs in the first year of retirement and who increase that withdrawal amount by 3% each year to compensate for inflation stand only an 11% chance of running out of cash before they die -- if they retire in a normal market.

* If they retire in a bear market, however, and do the same thing -- 4% initial withdrawal, adjusted thereafter for inflation -- their risk of running out of money can shoot to more than 50%.

There's much more over at MSN Money - very sobering, to be sure.