Money Mondays: Retirement For Baby Boomers

Skip: Hello, Mellody!

Mellody: Good morning, Skip!

Skip: Today is our final segment in our retirement series!

Mellody: It is. In the previous 3 weeks we have looked at how millennials and Gen X are doing when it comes to preparing for retirement. We also talked about the President’s new program – myRA – that creates a mechanism for people to save if they do not have an employee sponsored retirement plan, or if they are not able to contribute large sums. Today in the final piece, we will take a look at those who are staring retirement in the face to see how they are faring.

Skip: How do boomers view their current preparations?

Mellody: Last week I mentioned that Generation X was most clear-eyed about what they need for retirement, and behind when it comes to actually savings for retirement. Boomers are different. The baby boomers are the generation where expectations and reality do not always line up, and who can have a tendency to see their retirement prospects through rose-tinted glasses. Like GenX, boomers are realistic when it comes to having to work in retirement, with 60% of them saying they expect to keep working at least part-time after they “retire.”

And boomers and GenX agree when it comes to the changing notion of retirement, 82% of boomers and Generation Xers saying that a traditional retirement is a romantic fantasy of the past. But, there are some disturbing statistics as well. Numerous surveys found that boomers dramatically underestimate what they need to save for retirement, even as an astounding 65 percent of boomers said they “just have this feeling that everything’s going to work out” in retirement.

Skip: How are they doing in terms of preparation?

Mellody: Well, it depends on what you are considering, Skip. The boomer generation is one of contradictions when it comes to retirement.

On one hand, The Employee Benefit Research Institute found that just 56.7% of early boomers are on track to meet their financial retirement needs, and in houses where they are not on track, the shortfalls are significant. EBRI found that the gap came to an average of $71,299 per individual in a family, $93,576 for single males, and a whopping $104,821 for single females. On top of this, another survey found that nearly 4 in 10 boomers have NOTHING saved for retirement.

On the other hand, boomers are burdened with significantly less debt – student loans, mortgages, and credit card charges – than other generations. They hold significantly more equity in houses, with homeownership being much higher among boomers than younger generations. Overall, like the other generations, retirement savings are not where they should be.

Skip: What advice would you give to Baby Boomers who are close to retirement right now to improve their financial state?

Mellody: If you are a boomer nearing retirement, I have three suggestions. First, consider working past pre-set and psychological retirement ages of 65 or 66. If you can delay the need to file for Social Security by using working income to live off of, you could claim Social Security benefits later and maximize them, which is very important if your retirement nest egg is not as large as you would like it to be.

Secondly, remember that it is never too late to start investing. If you can, consider opening a Roth IRA, as they offer a number of advantages, such as catch-up contributions of an extra $1,000 when you are 50, tax-free capital gains, no contribution caps or age related rules for withdrawals. And finally, if you are uncertain of your options and your path to retirement, consult a financial professional, as they can help you to understand your options and take advantage of opportunities.

Skip: We will see you next week! Happy Thanksgiving, Mellody!

Mellody: You too, Skip!

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