Boomer's this is not your parents retirement. According to the Employee Benefit Research Institute (EBRI), in 1980, 39% of American workers had a pension that paid a guaranteed payout during retirement. In 2010, that number had shrunk so that 15% of workers now have pensions. This is very significant because effective January 1, 2011, everyday for the next 19 years 10,000 Baby Boomers turn age 65! This might explain why 27% of all workers are "not at all confident they about having enough money for retirement", and "74% of workers plan to work in retirement". 1 Also, Boomer's live longer, as The National Center for Health Statistics reports, the life expectancy at birth of an American male is 75.7 years today, an increase of 10.1 years since 1950. The life expectancy at birth of an American female is 80.6 years today, an increase of 9.5 years since 1950. Social Security Administration now reports that in 1950, there were 16 workers per retiree and at the end of 2010, there were 3.3 workers per retiree.What do you Boomer's think? Besides the EBRI's annual Retirement Confidence survey,2 there have been numerous recent polls all measuring the growing pessimism amongst baby boomers. Here are some highlights from one, the Associated Press and NBC's LifeGoesStrong.com polling from earlier this spring:
Only 11% of boomers think they will retire to a comfortable lifestyle. 24% of boomers say they have no retirement savings. 64% feel that Social Security will be their main source of retirement income. 25% of boomers in the work force say they will never retire. 66% of working boomers intend to work part-time or full-time after they end their careers. Yet the most recent Social Security Administration figures (2008) show that less than 50% of Americans age 65-74 earned income from a job.3
Reinforcing this pessimism is a 2009 research report by Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management in which they calculated the combined pension liability for all 50 U.S. states. The report estimated that combined, all 50 states had 2008 pension liabilities of $5.17 trillion, yet only had set aside $1.94 trillion in state pension funds at the end of 2008. Now although the stock-market has risen significantly since 2008, current and future retirees are right to be very anxious about their retirement. 4Hopefully, you are one of the fortunate few. The Associated Press/NBC poll found that nearly 1-in-10 respondents had more than $500,000 in dedicated retirement savings. Additionally, about half of those surveyed had retirement savings of more than $100,000.3 Yet this still begs the ultimate retirement question of ... Is that Enough? Well, 72% of American workers surveyed by the EBRI believe that they will nee d to accumulate no more than $1 million to enjoy a comfortable lifestyle during their retirement years.
A Million is not what it used to be! Based on work done by BTN Research a lump-sum of $1 million in a tax-deferred account (like an IRA or 401k) will sustain a consistent $73,800 withdrawal for 25-years assuming the assets continue to earn 6% per annum. However, if the $73,800 annual withdrawal is adjusted upward each year to account for an assumed 3% rate of inflation, the funds are able to make only 17 years of payments. This of course ignores the impact of taxes due on each withdrawal and the likely-hood that taxes will also be higher in the future than they are today. Steps today to save your tomorrow? First review the sources of retirement income that you will have in the future and make certain that you are maximizing them to the fullest extent. Look at your debt today and what it would be when you retire and focus on how it can be eliminated. Decide if retiring later is right for you? Or if changing your retirement assumptions is the right move to make. A delay in y our start date could give you added years of saving earned income and more group health coverage. You would also apply for Social Security later, which can result in substantially greater benefits during the remainder of your life. Consider all of the available tax reduction strategies appropriate for your tax situation. Stop procrastinating because tomorrow is here. Use all the resources at your disposal and don't be afraid to get independent evaluations of your current situation and prospective retirement plans! Citations1 - /pdf/surveys/rcs/2011/EBRI_03-2011_No355_RCS-11.pdf [3/31/11]2- /surveys/rcs/2011/ [4/27/11]3- msnbc.msn.com/id/42436897/ns/business-personal_finance/t/poll-reveals-baby-boomers-retirement-fears/ [4/5/11] 4 - /faculty/rauh/research/JEP_Fall2009.pdf [9/30/10]
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