Former NBC “Today” show financial editor Jean Chatzky has published a new book, with a warning about 401(k)s, IRAs and the danger of viewing retirement savings according to longevity statistics in the wrong way.

Here is the important point: Once an employee sets their official last day of work on the calendar, all contributions to the retirement plan — including matching funds and payroll deductions — will officially cease on that date.

“At this point, you have a choice,” Chatzky wrote in her new book, “The Forever Paycheck.”

“You can leave the money in the 401(k), roll it over into an IRA, or cash out, the latter of which you don’t want to do,” she continued. “As long as you’re 59½, you can start taking penalty-free distributions. But how much? How often? And how should you invest the money in between?”

The creators of the modern post-pension retirement system spent years urging individuals to save and invest, yet provided no proven blueprint or guidance on how to actually withdraw and utilize those accumulated funds, according to Chatzky.

“This bit of blind-sightedness is the equivalent of a toy manufacturer putting 999 pieces into a 1,000-piece puzzle box,” Chatzky wrote. “It’s a cookbook author not telling you at what temperature to roast that turkey you’ve been brining for 48 hours. It’s Ikea leaving the dreaded Allen wrench out of the box but still expecting you to build the damn bookcase.”

Chatzky warns Americans on 401(k), IRA savings, longevity danger

Transitioning from decades of disciplined saving to actually spending one’s 401(k) and IRA savings can trigger a deep sense of vulnerability, as moving away from the mindset of future-focused sacrifice often creates a genuine fear of mismanaging or exhausting those hard-earned funds.

Average American life expectancy has increased dramatically over the last three quarters of a century, climbing from roughly 68 years in 1950 to 71 in 1970, reaching 75 by 1990, and topping out near 79 prior to a slight pandemic-related dip that left it around 77 and a half years today, according to Chatzky.

“But looking at longevity from birth (in other words, how long you’re likely to live based on the year you were born) is a very dangerous thing to do, at least financially,” Chatzky wrote. “Those average-from-birth numbers can convince you that as long as you’ve saved enough money to make it to, say, 80, you’re fine.”

“In fact, you’re not. The average person looking at their assets and trying to make sure they have enough to continue to live comfortably for the rest of their life — as long as that turns out to be — needs to look at longevity not from birth but from retirement.

Fidelity explains how to decide when to retire

In the United States, employees are not subject to a compulsory retirement age, allowing individuals to remain in the workforce for as long as they choose or are physically and mentally capable. This allows them to keep contributing to 401(k)s and IRAs.

“That may actually be a good thing because, in some circumstances, work can actually be … great,” wrote Fidelity Investments. “Beyond the paycheck and benefits, it can provide structure and routine, camaraderie, and a sense of purpose.”

And working longer may actually help people live longer, according to research from the Center for Retirement Research (CRR) at Boston College.

“Men who worked longer due to the policy change saw their mortality rate in their 60s fall from about 8 percent to 6 percent,” CRR wrote. “This result implies about a two-month increase in their life expectancy if the improvement is limited to ages 62-65, but if the impact is longer lasting, it could raise life expectancy more substantially.”

The timing of one’s exit from the workforce significantly affects the amount of personal savings required to sustain lifestyle needs, with typical American retirement ages hovering around 65 for men and 62 to 63 for women.

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Although Social Security claims can begin as early as age 62, individuals who delay taking benefits can increase their monthly payout by 8% for each year they wait up until age 70, according to the Social Security Administration (SSA).

Fidelity explains the guidelines it suggests people use to figure out whether they on track to retire at age they choose.

“To retire at 67, we suggest aiming to save 10 times your final salary. To retire at 62, you’ll want to consider saving more — 14 times your final salary,” Fidelity wrote. “Aiming for these guideposts can help ensure that your savings can provide enough income to cover your expenses in retirement — along with Social Security.”

Jean Chatzky explains factors that make withdrawing from 401(k) plans and IRAs difficult for retirees.

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Chatzky discusses how 401(k), IRA withdrawals are not just math

What makes the transition into retirement so deeply challenging is that it goes far beyond simple numbers: it is fundamentally a psychological and emotional hurdle.

After spending forty years conditioned to accumulate wealth and exercise restraint in 401(k) plans and IRAs, suddenly shifting into a spending mindset feels intensely unnatural.

“You may have the money to do it. The numbers may say that you should feel free as a bird to take that trip, redo that kitchen, buy that car, contribute to that college fund. But. You. Can’t,” Chatzky emphasized in her book.

The reasons why this is such a struggle are many. Over several decades of working, we develop a habit of saving that’s tough to break,” Chatzky wrote. “We fear an uncertain medical event that we won’t be able to afford. We want to leave a legacy for the children we’ve raised and charities we’ve long supported. We worry about not being able to live our final days in comfort.”

“Or perhaps a parent (or someone else you respect) told you to ‘never spend your principal,’ meaning that you should be able to live off the interest that your investments earn,” she added.

What people need is what Chatzky calls a Forever Paycheck Plan.

“What you need is a plan,” Chatzky wrote. “Not a budget. Not a debt paydown scheme. Not instructions for getting into crypto at precisely the right moment. Not any other sort of piecemeal approach.”

Chatzky describes a Forever Paycheck Plan as “a set of instructions that acknowledges where you are today, assesses the possibilities for where you want to be in the future, and has a solid vision for managing that future perpetually (i.e., in a way that keeps it going for as long as you keep going yourself). All without making yourself nuts.”

“Even if you’re as young as 30, or even if you’re more than twice that age — and especially if you’re somewhere in between — the time to start building that plan is right now,” Chatzky wrote.

“Of course, everyone wishes they started yesterday.”

Related: Dave Ramsey emphasizes key warning on 401(k)s, IRAs