For most people, retirement is now an awesome time of new adventures. However, the financial challenges of retirement can feel overwhelming for many — especially middle-income baby boomers.
Baby boomers may be ready for retirement adventure. But can we afford it?
Baby Boomers are on the leading edge of the transition from institutional responsibility for retirement financial security to being independently responsible for retirement, which brings its own unique set of challenges, according to a recent study from the Bankers Life Center for a Secure Retirement.
Baby boomers are fit and ready for some fun in retirement. Studies show that people now see retirement as a time of new challenges and adventures. This is no longer the time for a rocking chair.
However, most Boomers have not done enough to prepare for their retirement years. About 69% of Boomers admit that they do not have or do not know if they have the financial resources to live comfortably in retirement to age 85, the study found.
Since the first group of Boomers turned 65, there have been a number of financial challenges reported for those in the middle income group. More than half of non-retired middle-income Boomers say they are spending as much or more than their household income, which then naturally puts a strain on how much they are able to put away for retirement.
Middle-income Boomers do tend to have financial knowledge about their retirement options, but the problem is that many are not using this information to benefit their personal retirement plans.
Excluding creating a retirement account or making contributions to savings, only 61% of middle-income boomers have taken at least one additional active retirement planning step. And nine in 10 don’t have a retirement plan in writing, the study found.
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One reason middle-income Boomers may be having more trouble with retirement planning is that when they entered the workforce, their employers took on a significant amount of the retirement savings burden, usually providing lifetime defined benefit pension payouts.
But as much of the country has seen, employers are ending these programs left and right. Many companies are now switching over to defined contribution retirement plans like 401(k) plans, IRAs or annuities.
It is almost like the rug has been pulled right out from beneath baby boomers. Pensions provided a cushion into retirement, but they have all but disappeared.
Currently, there are about 48% of retired middle-income Boomers who receive an employer pension, but for those who are not yet retired, it drops to 33% of workers who will receive one in retirement, according to the study.
For most of us, our retirement security is now our own responsibility.
Because most of us do not have a pension to help fund retirement, we will be relying heavily on Social Security.
Eight in 10 retired middle-income Boomers rely on Social Security or an employer pension to be the primary source of retirement income, while only one in 10 rely on personal investments, savings or employment as their primary source of retirement income.
Today though, depending solely on Social Security may not be the best option due to the mixed messages and questions that surround the Social Security benefits program in the U.S.
Also, for most middle-income Boomers, Social Security income is not adequate. The average personal benefit from Social Security is about $1,708 per month, or $20,000 per year, according to the Social Security Administration. And with the cost of health care as well as senior care increasing each year, living off of Social Security in retirement is no longer a fool-proof option.
However, some people make Social Security work. Learn more about living on Social Security alone.
The good news though is that whether you are diving into retirement right now or still have some time to plan, there are ways to turn things around and come out with a retirement plan that can stabilize your finances through your golden years.
Small tweaks can make a big difference. Working an extra year, working part time for a few years, downsizing, spending a little less are all ways that you can make retirement viable.
Get ideas for how to do a better job planning for your retirement by using the NewRetirement Retirement Calculator.
NewRetirement’s calculator is designed for anyone who is worried about their retirement — especially people nearing the end of their careers who are in their 50s and 60s. While savings and investments are an important aspect of the tool,
