Baby Boomers are ill prepared for retirement, the Insured Retirement Institute (IRI) says in its new report, “Baby Boomers and Retirement Planning Strategy.” Forty percent have no retirement savings at all, and 69% have no defined benefit plan. Of those who do have savings, 59% have saved less than $250,000 and 37% have saved less than $100,000.
Annual expenditures for today’s 65-year-old retiree exceed $50,000, yet Social Security generates only $16,000 a year on average.
However, the good news, IRI says, is that Boomers can take steps to rectify the situation. Retiring at age 70 instead of age 65 can reduce needed retirement savings to approximately $720,000, and moving to an area of the country with a lower cost of living can further decrease that amount.
A 50-year-old saver who takes advantage of retirement plan catch-up contributions of $6,000 per year until age 70 at a 5.5% annual rate of return will add another $239,000 to their savings. Boomers can also seek help from family, increase their savings, reduce expenses in retirement and attempt to maintain the best health possible.
The report concludes, “Statistically, the retirement realities facing many Boomers are grim. Put simply, they face a dangerous combination of being under-saved and long-lived. Those at the point of retirement with no savings and who are unable or unwilling to delay retirement are in the worst position, and will need to take the most drastic steps to reduce expenditures. Those with time left to build savings can take steps to increase their savings as much as possible, delay retirement to maximize Social Security and reduce the cost of lifetime income, and work on reducing anticipated expenditures by carefully planning both the timing and location of their retirement.”
The full report can be downloaded here.