Some 76 million Baby Boomer are now reaching retirement age, and they account for nearly one-fourth of the U.S. population. The oldest of those, reaching age 66 this year, are likely contemplating retirement or have already done so. About 10,000 a day qualify for Social Security payments, and many of them have done a poor job in preparing for what faces them.
According to an article published on The American Dream, a social commentary website, as many as 36% of those in the Baby Boomer generation have not contributed to a retirement program of any kind. Among those who did, many relied on 401(k)s and investment portfolios that have been seriously compromised by collapsing markets.
The Employment Benefit Research Institute reports that 35% of those of retirement age are almost totally dependent on Social Security benefits for income, and only half of the remaining 65% have retirement savings of $50,000 or more.
The 2010 MetLife Annual Survey of Employee Benefit Trends indicated that 62% of the younger members of the Baby Boomer generation and 60% of the older members felt they were behind schedule in retirement preparedness. The survey also indicated 16% of Boomers reported they had not started retirement planning, and 20% said they had no savings goal at all. The MetLife study involved interviews with 1,508 business decision-makers and 1,412 fulltime employees over age 21.
The question is, why haven’t they planned? Thirty-four percent of older Boomers said they did not understand the process while 39% said they didn’t have money to invest in their future.
While many Boomers may have done well in preparing for retirement, circumstances sometimes intervene. Half of those retiring don’t retire by choice. Instead, conditions such as disability, death of a relative, downsizing or a plant closing cause them to end their career earlier than planned.
The disruption interferes with plans to continue contributions to their nest eggs and lengthens the amount of time they will spend in retirement, relying on what they have accumulated.
In some cases, Boomers also delayed having children, which leaves them approaching retirement as their offspring are completing college.
The main problem in retirement planning is procrastination, with many Boomers not addressing their concerns until they reach their 50s, and by then it may be too late to achieve their goals requiring them to face difficult decisions: “Do we downsize our house, push off retirement, work part-time during retirement or try to live on less?
Common misconceptions arise as potential retirees discuss their plans. Most individuals underestimate what they will need or what they will want to live on in retirement. There are costs for basic needs that will continue to increase even when they retire — gas, food, taxes, insurance, and this causes a surprise when they realize how much they will have to supplement what Social Security provides in retirement.
It’s never too late to start planning, but if you wait too long to start, it may be too late to achieve your goals.