Most of those individuals who see retirement right around the corner – the Baby Boomers born between 1946 and 1964 – lack strong conviction that their Golden Years will, indeed, be golden.
The Wall Street Journal1 reports that workers of all ages are saving too little of their paychecks to retire, creating “powerful financial and demographic forces combining to squeeze individuals and companies that are trying to save for the future and make their money last.”
The numbers tell a shocking story, according to the WSJ:
- 57% of U.S. workers have saved less than $25,000, excluding home equity, for retirement. $25,000 may not last long for retirees, who are living longer as life expectancy rates rise.
- 28% of Americans have no confidence they’ve saved enough for retirement – the highest level of uncertainty ever recorded in a study conducted by the Employment Benefit Research Institute2.
- The EBRI study also reports that, “One reason that retirement confidence has remained low…may be that some workers may be waking up to the realization of just how much they may need to save.”
- To achieve retirement security, 20% of respondents to the EBRI study indicate the need to save between 20% and 29% of their earnings, while almost one-quarter of respondents indicate the need to save 30% or more of their current earnings to ensure a secure retirement.
- Other expenses – debt service, tuition and other life expenses – are considered more important to savers looking to improve chances for a secure retirement. Only 2% of workers, and 4% of retirees, “identify saving and planning for retirement as the most pressing financial issue they face.”
- The rising cost of living and daily expenses lead the list of reasons why older workers are unable to save more for retirement, with 41% of eligible workers citing living expenses as the main reason they don’t save more.
- 55% of workers, and 39% of retirees, cite debt load as a reason that increasing retirement savings is difficult.
- Only 23% of workers, and 28% of retirees, have consulted an investment professional, but only 27% of these savers actually followed the advice of an investment professional.
It’s clear that a large number of Baby Boomers are uncertain about their retirement years. Given that the amount of money invested for retirement by workers is so low, many of us may be working much longer than we ever anticipated.
So, what can Baby Boomers do to catch up? What can workers nearing retirement do to enjoy a brighter, more secure future?
While the numbers may be bleak, there are things workers can do, starting today, to enjoy a better, longer, more secure retirement.
Time for Baby Boomers to Catch Up – You Can Do This!
It’s time to take control of your personal finances. We’re living longer in retirement, and having enough saved and invested isn’t easy, but you can do it.
1. Start by figuring out how much you’ll need. Calculate what your monthly expenses will be in 10 years or 20 years. Don’t forget to factor in inflation, which increases prices and erodes spending power. Everything will cost more in the years ahead with inflation factored in.
2. Put off collecting Social Security. Yes, you may work a few years more, but your monthly Social Security check increases the longer you wait to start collecting. You can start collecting at 62 years of age, but if you wait until you’re 65, your Social Security check will be larger each month. If you wait until you’re 70 to start collecting Social Security, your monthly check will be larger still. Consult the Social Security website for online calculators.
3. Automate your retirement savings. Talk to your employer, or your bank representative, to set up an automated savings plan. With an automated plan, savings are automatically deducted from your paycheck or bank account and invested each month, or at intervals you determine with the help of your bank’s retirement advisor.
4. Pay down debt. Debt drains financial resources that could be invested in long-term vehicles to improve your opportunity for a more secure retirement. Pay down your credit cards. Pay off a second mortgage. Pay off your first mortgage faster.
5. Stop spending. A vacation can cost a few thousand dollars – money that could be invested for the future. So enjoy a stay-cation and save more each year. Maintain your car to make it last longer and eliminate a monthly car payment. Use that extra money to invest for future retirement.
Whether you’re still punching the time clock, or enjoying retirement, you can improve your future, starting today, by saving more, spending less, and working with an investment planner at your bank to help you meet your goals for your retirement years.
Talk to the retirement specialist at your bank today. The more time you have to save for retirement, the easier it is to save. So start today, and enjoy a brighter future every day for years to come.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.
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