After reviewing the statistics from a recent poll by the Associated Press and LifeGoesStrong.com, it’s clear that baby boomers are beginning to realize the growing risk of retirement affordability. Nearly half of all baby boomers creeping into the retirement ranks do not feel confident that they will have the financial resources available to live comfortably throughout their retirement. And I’m sure it’s not a surprise when I say that the recent economic downturn has been a key player in the fear and worries ofmost baby boomers. Let’s take a look at the findings from the poll and the different factors coming into play when it comes to planning for retirement.
More than half of those polled – 57% – reported that they have lost money in a retirement plan, personal investments or real estate during the recent economic downturn. Economic anxiety is taking its toll on the nest eggs of most baby boomers. Pensions, social security, and individual savings plans like 401(k)s are no longer secure enough to ensure a financially stable future. As a result, many are delaying retirement: of those who lost money in the economic downturn, 42% say that loss has delayed their retirement.
So what other factors are determining the confidence of pre-retirees? Marital status, household incomes, financial management skills, current retirement savings, and even college degrees have made a difference in how fearful baby boomers are about retiring.
● Married baby boomers feel more prepared to retire (61%) than unmarried baby boomers (46%).
● Those in higher-income households feel more prepared to retire (66%) than those with household
incomes below $50,000 (35%).
● Of those who rate their own financial management skills poorly, only 14% said they felt prepared to retire. Nearly half (47%) of self-confessed poor financial planners have no confidence at all.
● Among baby boomers without a college degree, 37% have saved nothing, compared with 10% of baby boomers who have college degrees.
Looking at the median numbers of those who have saved up for retirement puts how scary this situation is in perspective. Of those that have saved at least something for retirement, the median stands at $100,000. As a whole, baby boomers’ median retirement stands at $40,00, brought down by the 24% of them who have saved absolutely nothing for retirement. What’s even scarier is the number of pre-retirees who use their Social Security income as a financial safety net. 65% of baby boomers ranked Social Security as ‘extremely’ or ‘very important’ when it comes to income during retirement. According to the Congressional Budget Office, Social Security is expected to run dry by 2037. What will retirees do then?
We are looking down the barrel of the most daunting retirement income challenges in history, that are not only changing the way we save for retirement, but also what we will do in retirement. Even for those who believe they’ll be able to retire, 67% plan to do some sort of work for pay once they have retired from their career, with 35% saying they will do so in order to make ends meet. Retirement is no longer about traveling and vacations, but more like the survival of the fittest. Or the smartest. Or the best prepared.
If you are uncertain about your own retirement ability, contact your financial advisor today. There may be financial planning options and strategies that you are not aware of and that could help augment your income during retirement.