I recently read an article that I wanted to share the basic core ideas with those of you that are Baby Boomers and as a warning for Generation X. Are Baby Boomers headed for a retirement crisis and if so, is Generation X far behind? For many Baby Boomers, those born from 1946 through 1964 it may be too late if you are already retired. But if you are still working, you may have the opportunity to make things better for yourself. And for people like me in Generation X, this serves as a wake-up call for you to get on top of things to prepare for your retirement and avoid the mistakes of many Baby Boomers.
Background
With an estimated 10,000 Baby Boomers retiring every day, this means an alarming rate of people are leaving the workplace and transitioning to retirement. But are these Boomers prepared? The answer here is, on the whole, they are not prepared at all. The average worker has very little saved for retirement, and Boomers are no exception to this statistic. In fact, a 2018 Retirement Confidence Survey found that 45% of workers reported that their investments and savings were less than $25,000. That is an alarming figure when you consider that on average adults over the age of 65 spend approximately $49,000 a year. That means these working adults will not even have enough saved to survive for a single year without some external assistance.
So, what is the breakdown of savings for the typical American? Here is how things breakdown for savings by ranges:
$10,000 to $49,999 7%
$50,000 to $99,999 13%
$100,000 to $199,999 12%
$200,000 to $299,999 10% and
$300,000 plus 16%
The remaining percentages have less than $10,000 saved or roughly 32%. That is an extremely scary figure to look at when you consider the only other source many people have available to them is Social Security, and for many that will not be enough either.
And for Boomers, it is estimated that 45% have no savings at all meaning 55% have some savings for retirement. But of that 55% about 28% have less than $100,000 saved, which will not ensure the retirement that you envisioned. Again, placing a heavy reliance on Social Security.
Why Boomers Lack Funds
A key reason behind the lack of savings for Boomers can be found in the Great Recession of 2008 and 2009. I know that these two years of the recession scared many away from investing at the wrong time and caused many to act in anticipated but damaging ways, they sold low and never got back into the markets. And by doing this, Boomers caused serious damage to their savings and potentially their retirement.
And if a Boomer did sell at the wrongs time the interest rates, they found in bonds was not a good fit either. Ever since the recession interest rates have been at historic lows providing little in the way of reliable income for people who invested in bonds.
Takeaway
With so many Boomers retiring daily it may be too late for many to do much about their savings and potential retirement besides delaying their retirement to continue working. And with so many Boomers with no retirement savings, they will need to plan properly in their reliance on Social Security. If you are a Boomer that is lucky enough to own your home outright consider seeking the assistance of a financial planner to see what may or may not be good options for you with regards to your savings and the value lock in your home.
With regards to Social Security, you may be surprised to know that 90% of retirees today receive benefits compared to 69% in 1962. And unless you are in the lucky 55% with some savings for retirement, the average Social Security benefit is about $1,450 a month compared to the average salary of $3,600 you made while working. That is almost a $2,000 deficit that must be made up from somewhere, and for most that is where the crisis comes into play. They have no savings to make up that difference.
Conclusion
As a Registered Financial Consultant and Registered Social Security Analyst, I am here to assist you in any manner that I can. Yes, for some in retirement or very near to it, this may seem like a hopeless situation but that are always options and things that can be considered. Everyone’s situation is unique, and no two situations are the same, so seek out a qualified financial planner and work with them to achieve some plan as you approach retirement. And for Generation X, look at the situation many Boomers are in and take steps now to ensure you do not create a crisis of your own.
For more information or if you have any questions, feel free to contact me here or directly at kirk@kgmeyerpc.com. To join our newsletter and receive some gifts, fill out the form below.
