NEW YORK (CNN/MONEY) -
Gay Lee Andrews never imagined things could get so bad.
At 72, she and her husband, Ray, have already eaten through their entire $150,000 nest egg -- and they haven't even really retired yet. They both worked two part-time jobs and have a string of medical problems including diabetes, asthma and arthritis. He just got laid off at one job and now they have to sell their home of 40 years, a place full of memories outside of Chicago, where they raised five children.
They can't pay their prescription drug bills, let alone take the grandkids fishing. The so-called golden years are supposed to be a time of peace and prosperity, but for plenty of Americans, like the Andrews, it's been filled with financial fears.
"The grandkids don't understand why gram and grandpa can't do things with them the way they used to," Gay Lee said, getting choked up. "That hurts the most."
The dark side of retirement planning
Will you have enough? Study after study shows that Americans aren't saving enough for retirement.
* A recent study by the Economic Policy Institute, a non-profit Washington think tank, found that more than 40 percent of households headed by someone between the ages of 47 and 64 will experience a steep drop of income in retirement. The study found incomes would drop by more than half, even though financial planners said people will need at least 70 percent of their income, and probably more, after they stop working.
* An AARP report found that four out of ten Americans over the age of 60 will experience poverty at some point in their lives.
* A study by the Employee Benefit Research Institute (EBRI), a Washington-based non-profit policy research group, found that 67 percent of workers have access to a retirement plan at work. But 31 percent of them do not participate.
* The average 401(k) balance fell to $41,919 in 2000 from $46,740 in 1999, according to a study by benefits consultant Cerulli Associates in Boston. It's likely that 401(k)s lost money again in 2001, though the new report won't be available until early summer. While many were disheartened by the losses, they also glazed over one scary thought: plenty of 401(k) plans have a balance of $41,919 or less.
* Enron's collapse into bankruptcy last fall caused thousands of employees to lose more than $1 billion in retirement assets when the company stock in their 401(k) plans plunged. The losses triggered public outrage as well as fears about other plans that are loaded with company stock.
Craig Karpel, author of "The Retirement Myth," a book about how Americans aren't saving enough for retirement, notes the evolution in corporate America from traditional pensions to 401(k)s has left thousands of workers short on savings.
Companies in the old days sat down with actuaries and figured out exactly how much it would take to pay a person a pension for life. They took into account factors such as life expectancy and inflation. But with 401(k) investing, workers set aside only what they think they can spare from living expenses. And companies only contribute enough to impress their workers, Karpel said.
"Employees put in what suits them, not what they need to retire," Karpel said. "Employers are contributing enough to keep employees happy -- not enough for employees to retire on."
Wendy Hobbs, a certified financial planner from Phoenix, estimated that about 90 percent of her clients aren't saving enough for retirement. She tells them they should save 20 percent of their income.
"I keep telling them they're going to live longer than they think," Hobbs said.
Another priority, according to Hobbs, is to max out your retirement plan at work -- you can save up to $11,000 this year in your 401(k), and the amount is rising to $15,000 by 2006. The amount of income you'll need in retirement will vary from person to person. One person might need $10,000 a month to cover living expenses, while another can get by on $2,500. (Click here to use CNN/Money's asset allocation calculator.)
A couple in their 60s might have $200,000 saved and think they're in good shape - but that's not nearly enough, Hobbs said.
In the end, people who don't save enough will have three choices: postpone retirement, work part-time or live more frugally. All tough choices, none of them very pleasant, said Mary Mahoney, a CFP from Albuquerque, N.M.
"It's frightening to think that people don't have enough money to retire, so they don't think about it," Mahoney said. "They don't want to deal with the problem. It zaps your energy."
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For Gay Lee Andrews, the $150,000 she and her husband had saved wasn't nearly enough. Add sky-high drug bills and a leaky roof, and they're barely getting by. It's not how she imagined things would be.
"We worked hard all our lives and we've watched our savings dwindle away," she said.