Baby Boomers are up for a troubled retirement – are you one of them?
Baby boomers, the generation that is born between 1946 and 1964, are making waves as they enter retirement that will continuously happen for the next 15 years. And as their golden years are fast approaching, one big question stirred up the minds of the people – are baby boomers ready for retirement?
Americans are known to have a troubling issue when it comes to retirement savings, and this fact is so true to baby boomers. The aging of this iconic generation comes with lots of statistics about their unpreparedness for the future. The generation’s lack of preparation, financial resources, and steady employment has caused them a dreary future.
Here are the information and statistics to get a clearer picture of retirement readiness of boomers and know what you can do to get yourself ready, especially if you are a boomer.
The baby boomer’s alarming statistics
According to the latest research done by GoBankinng rates last year with 1,504 adults over the age of 55 respondents, saving for retirement is not an area of financial strength for Americans. The research reported that:
> About 3 in 10 of respondents age 55 and over have no retirement savings.
> 26 percent report retirement savings with balances of under $50,000, an amount that is insufficient for people nearing retirement age.
> Over half (54 percent) of people age 55 and over have balances far behind typical retirement fund benchmarks for their age group.
Fortunately, not all baby boomers and seniors lack savings. Some of them have managed to put away a substantial amount of savings in their retirement accounts:
> 26% of ages 55 to 64 reported having healthy retirement savings with balances of $200,000 or more.
> 31% of seniors ages 65 or over have balances of $200,000 or more.
But wait there’s more! Those who are next in line to retire doesn’t face a healthy future either. Based on the data sets, GOBankingRates determined that people of the following ages, representative of the survey age groups, are on track or behind at the following rates:
|Age||Median Income||Retirement Savings Benchmark||Percentage on Track||Percentage Behind|
|24||$34,605||Started a retirement fund||48%||52%|
Source: Gobanking rates
Another survey that attests baby boomers are not really ready for retirement is The Boomer Expectations for Retirement 2016 published last year by Insured Retirement Institute (IRI). Here are the ten key findings of the survey:
> Just about 24% baby boomers said they are confident that they will have enough savings that will last their entire retirement. The result has dramatically decreased from the result of 2012 which is 36%.
> Of those baby boomers who lack confidence, 68% of them said that they should have saved more and 67% said that they would have started earlier when asked what they would have done differently.
> Only 39% tried to figure out their retirement savings need. A third of them did not include health care costs in their calculations.
> The average estimate of boomer’s health care costs will consume 23 percent of their retirement income.
> Just 55% have some money saved for retirement. 1 in 4 boomers says they expect significant income from an employer-provided pension.
> 59% of boomers expect to rely on Social Security as a major source of their retirement income. 65% of them are worried about possible Social Security changes in the future.
> Only 43% are satisfied in their life from an economic perspective.
> 26% of boomers don’t plan to retire until age 70 or later.
> Only 22% of Baby Boomers believe they are doing a good job of preparing financially for retirement.
> Only 27% of Baby Boomers believe they will have enough money for health care expenses.
Why are Boomers not confident about retirement?
Based on the statistics above, it is not surprising anymore that many baby boomers are not confident about their retirement.
According to the data published by Vanguard, the average American in the 55 to 64 age group has a 401(k) balance of $177,805. The said amount seems to be a lot of money and might be enough for retirement. But think again. You should remember that the amount should last the entire retirement which could mean several decades. Using the very popular 4% rule, it shows that a retiree can only withdraw about $7,100 per year from their account. Even with a Social Security, the said amount of income is not enough to support the needs of a retiree in his entire retirement years.
There’s only a small group of people who have saved a lot for their retirement which means there’s a whole lot of people who wasn’t able to save enough, or worst nothing at all, for their retirement!
Why baby boomers lack retirement savings?
There’s not one answer or a straight answer to why baby boomers don’t have enough retirement savings. But one of the possible reason is the great big stock market decline that happened last 2008-2009. The event might have scared some older adults and caused them panic. The recession of 2008 has been very difficult to most people and caused them to sell what they have. If they haven’t consulted a financial planner to help them sort things out, the most probable thing they did was just based on hearsays or opinions of friends or other people. That actions caused a negative impact on their future.
Lack of information and knowledge about the importance of saving early is also one of the possible reasons why they became unprepared. Another is the long years of having low-interest rates which undermined the funds of those who are saving.
What to do if you are behind on retirement savings?
If you don’t have enough savings and you’ll be retiring sooner than you realize, don’t be discouraged yet! There are still things you can do, to make the most out of the time left before you finally retire.
Make changes to your current retirement saving accounts. Consider increasing or maxing out your contributions to your 401(k) or other retirement accounts. People age 50 and over can make catch-up contributions to a traditional 401k, in addition to their regular annual contribution limit.
Tweak your budget by trimming your expenses and paying debts; this should make room in your budget to add more to your savings.
Include health care plans
Health care is a heavy expense that you will possibly face in your retirement. Without proper plans and preparation, you savings that should sustain you all throughout the retirement can be diminished by this expenses in just a matter of few months or years.
As much as possible, ensure your health and get coverage to help you face health care costs efficiently. People covered by insurance are most likely to survive their savings than those who do not have insurance or high deductibles. Also, it is never too early to learn and understand Medicare, Medicare supplement plans, Advantage plans and Medicaid ahead of time. Knowing the benefits of those health care options will help you plan strategically how what or when you will be able to use them to your advantage.
Save as much as you can
Save like there’s no tomorrow or like you’ll retire tomorrow. Work a little harder to be able to save. Prioritize your retirement and take all the important steps to give your future self a comfortable life. If you think that retirement is near or will come soon, you will be able to stay on track of your retirement contributions, and won’t fall behind.
Make retirement on top of your priority list, and you will soon harvest your hard earned comfortable future.