Money in the Middle

Sandwich Generation Talking About Money Up, Down and Across Generations

More Boomers Face Retirement Risk

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Another gloomy report on the financial prospects of retirement for baby boomers and Generation X. 

The National Retirement Risk Index from the Center for Retirement Research shows that today half of Americans will not have enough retirement income to maintain their pre-retirement standard of living.

 Here’s why:

1. Social Security benefits till replace a smaller fraction of pre-retirement earnings as the full retirement age rises from 65 to 67.

2. Fewer and fewer workers have a defined benefit plan (pays a set income) and must count on their 401(k) plans.  In theory, that’s okay.  In reality, most of us have made mistakes along the way.  That leaves the median balance at $78,000 for those approaching retirement. 

3. Most workers don’t save outside of their 401(k).

4. Retirement assets will yield less income, especially bond yields.  In addition, out-of-pocket medical expenses are expected to continue to rise consuming more of retirement income.

 So, those who were at risk of not being able to continue their lifestyle into retirement are more at risk than ever.  And those who were not at risk may find themselves at risk going forward – or at least closer to the line than they would like to be. 


Percent of Households ‘At Risk’ at Age 65 by Cohort, 2004, 2007, and 2009

Income group
  2004 2007 2009
All 43% 44% 51%
Early boomers 35% 37% 41%
Late boomers 44% 43% 48%
Gen Xers 49% 49% 56%

Source: Authors’ calculations.  CRRBC Oct. 2009 #9-22


The good news is that younger households, who keep saving, may be able to catch up.  But for most baby boomers and seniors, time is not on your side for catching up.  The plunge in home values is one of the main reasons as many people looked to their home to fund their retirement.

 So what can you do? If you’ve planned well, have a pension and 401(k) and know the income you need for your retirement lifestyle – good for you!

 For the rest of us…unfortunately, there’s no magic silver bullet.  It’s a matter of doing what you can to adjust your lifestyle and continue to save as much as you can, in retirement funds and outside; work longer than planned to help build up retirement assets; pay down debt and calculate the numbers carefully on when to take Social Security.

 If you need assistance, get the help of a financial professional.  As friends for referrals and check with your 401(k) plan to see what financial planning tools and resources are available.

 It also time to accept that retirement won’t quit be they way you thought it was a year ago.  And an opportunity to help younger generations understand the importance of financial planning and starting retirement savings as soon as they can.

Resource:  National Retirement Risk Indes:  After the Crash


Written by Laura Rossman

October 27, 2009 at 6:45 pm

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