A survey by the Indexed Annuity Leadership Council (IALC) finds 60% of Baby Boomers think they need less than $1 million in retirement, when in reality at least a quarter of a million will be needed for health care costs alone. One in four Baby Boomers have less than $5,000 saved for retirement.
Nearly half of Baby Boomers don’t know that there are financial products that deliver lifetime income, and two out of five think they will get more money from Social Security than the average monthly payment.
Many Baby Boomers are banking on Social Security as a main stream of money for retirement, yet more than half cannot correctly guess the average monthly Social Security payment. Many think the average monthly payment is $500 more than it actually is—a budget miscalculation that will leave them nearly a quarter of a million dollars short over a 30-year retirement, IALC says.
The study found budgeting troubles rather than retirement come to mind when Boomers are asked what they would do with a large cash gift. Forty percent prioritize lifestyle purchases over retirement savings, and 52% have debt to pay down before saving for retirement.
“Struggling to estimate how much money will be needed during retirement or sifting through different financial products can feel like a big hurdle, especially for those close to retirement,” says Jim Poolman, executive director of the IALC. “The good news is it’s fairly easy to increase your retirement IQ. Start with the basics of estimating retirement costs and getting a balanced portfolio in place.”