Last month, I read a study released by the Insured Retirement Institute (IRI) which surveyed 803 Americans aged 52 to 68 (Baby Boomers) on their expectations for retirement. I was shocked to read that the overall “economic satisfaction” for Boomers has dropped to a five year low of 48 percent. I’m assuming that the economic satisfaction they refer to in the survey equates to a financial “comfort zone,” i.e. enough savings and income for retirement.
Between 2011 and 2013 the satisfaction levels averaged 77 percent and then dropped to 65 percent in 2014. Then they tanked 17 percent in 2015 to 48 percent, meaning that over half of America’s Baby Boomers are not satisfied with their financial situation as they either prepare for or enter retirement.
Looking further into the research I found a glaring reason behind this. It shows that as of 2015 only 5 out of 10 Boomer retirees have any savings, and plan to rely completely on social security and/or pension income.
That’s right, according to this research almost half of the retired Baby Boomer population has no retirement savings at all. About 34 percent have $100,000 or more saved, and only 19 percent of Boomers have $250,000 or more saved for retirement.
According to my own research for my book, You Can Retire Sooner Than You Think, I found that the tipping point for my happy retirees was when they reached $500,000 in liquid net worth (retirement savings). Clearly, only a small fraction of Baby Boomers have reached that financial happiness checkpoint.
With such dismal retirement savings, what are all these retirees planning to do for cash flow in retirement? According to the IRI’s report, as of 2015, 50 percent of Boomers surveyed cited Social Security as a major source of income during their retirement. Perhaps that’s why Get What’s Yours, a book on maximizing your social security checks, has taken the number one spot on Amazon for retirement books.
While all these statistics make me anxious, apparently this generation still isn’t worried about retirement.
This study also gauged the retirement expectations for Baby Boomers as compared to their parents. Almost half of those surveyed believed that financially they would be about the same as, or better than, their parents. Adding to this, about 50 percent of these people believe they’ll have enough money in their retirement budget for basic expenses, and some money left over for travel and leisure.
This unfortunately tells me that too many people in the Boomer generation need a reality check.
There was some good news in this report, though. The IRI looked into the retirement preparedness of Boomers who work with financial advisors versus those who go at it alone.
Those who had worked with a financial advisor were almost twice as likely to have saved at least $100,000. It makes sense that those who have worked with an advisor are more likely to be conscious of their retirement savings.
Another good rule of thumb from my book is to spend at least five hours a year planning for your future retirement. Rather than guessing, ignoring and hoping your retirement will be better than your parents’, put in the time beforehand planning it. Then you’ll be much better prepared for the realities of your retirement.
I think that if all Baby Boomers would just do some real retirement planning we would end up with a less dire retirement outlook for America. Ultimately, Boomers need to set more realistic expectations for their retirement planning, and if they don’t like that reality, they need to create a strategy to change it.
While I’d love to wave a magic wand and solve the upcoming retirement crisis, ultimately it’s up to all of us individually to make it work.
Certified financial planner Wes Moss offers financial and accessible investment advice to Atlanta Bargain Hunter readers.