Many baby boomers don’t have nearly enough money to retire.
The median amount they have saved for retirement is $144,000, according to a recent survey from Transamerica Center for Retirement Studies, a figure that should be a “call to action” for boomers, said one financial expert.
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“When we think about it, $144,000 to last in retirement that could be 20 or 30 years just isn’t going to go very far,” said Catherine Collinson, CEO and president of the Transamerica Center, in a conversation with Yahoo Finance. “It’s a very alarming number.”
Financial firms, such as Fidelity Investments, recommend those nearing 67 to have saved 10 times their salary. But Collinson said the shortfall for baby boomers is largely because of the late emergence of 401(k) pre-tax retirement plans.
‘The overall retirement landscape has changed’
Employer-based 401(k) plans didn’t become readily available until the late 1990s, according to Collinson, and therefore younger generations had an advantage.
“Baby boomers were well in their careers when 401(k)s were invented,” Collinson said. “The overall retirement landscape has changed from defined benefit plans to 401(k) plans [and] boomers are the closest generation to retirement.”
Collinson said the boomer experience should serve as a cautionary tale for younger retirement investors.
“This is also indicative of an important message for everyone.” Collinson said. “Over the course of a 30- or 40-year working career, the retirement landscape will change and we can rely on the system, but we also have to rely on ourselves.”
Almost 2 in 5 Americans worry that Social Security will be reduced or eliminated and the same share worry about outliving their savings and investments, according to the survey.
“The formation of Social Security was a big part and is still a big part of retirement income for many people,” Collinson said. “The fact that [baby boomers] are getting closer to retirement and have lesser savings, naturally as a result, they’re more likely to say they’re going to rely on Social Security when they retire.”
‘Be a superstar at your employer’
For those nearing retirement who are low on savings and worry about their job security, Collinson said now is the time for them to put in the work at their current jobs to stand out.
“Those beyond 65 — to me, a surprisingly few — only about half said they’re focused on performing well at their current job,” Collinson said. “If there was ever a time in history to be a superstar at your employer, now is that time.”
Collinson also advised older employees to focus on keeping their job skills up-to-date through employer training. More than two-thirds of baby boomers either plan to or are already working past age 65 or do not plan to retire at all, according to the survey.
“Will that guarantee employment in the worst unemployment rate that we’ve seen since the Great Depression? No, it won’t guarantee it,” Collinson said. “But it can better your chances and it could possibly open up new avenues for other sources of income…If there was ever a time for us to be creative, now is that time.”