Many boomers face grim retirement

Baby boomers can expect to have less to spend in retirement than their parents did. And that's without cuts to Social Security and Medicare.

By Karen Datko Mar 6, 2013 12:40PM

Image: Money in nest (© Steven Puetzer/Getty Images/Getty Images)Here's a watershed: Baby boomers are expected to have a lifestyle in retirement that's not as good as their parents' golden years.


That reverses more than a half century of American progress.


"This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age," Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research, told The Washington Post.


While the prospects of aging boomers dim, some lawmakers are clamoring for cutbacks to Social Security and Medicare.


Let's assess the situation:

  • According to a U.S. Senate committee report (.pdf file), the Center for Retirement Research at Boston College estimates that the "retirement income deficit" is $6.6 trillion. It's "the gap between the pension and retirement savings that American households have today and what they should have today to maintain their standard of living in retirement."

"According to the Employee Benefit Research Institute, only 22% of workers 55 or older have $250,000 saved for retirement. What's more, 60% of that same age group has less than $100,000 socked away. Clearly not enough to retire."

  • The Post adds, "Overall, people ages 55 to 64 have a median retirement account balance of $120,000, Boston College researchers have found, which is enough to fund an annuity paying about $575 a month, far short of what they will need."
  • The Post also says that "the Center for Retirement Research estimates (.pdf file) that 53% of American workers 30 and older are on a path that will leave them unprepared for retirement," compared with 38% in 2001 and 30% in 1989. This isn't a trend; it's a road to poverty.
  • Half of workers have no retirement plan through their employer, the Post says.

Blame goes to the usual suspects -- stagnant wages and a Great Recession that obliterated a lot of middle-class net worth. Rising health care costs and increasing debt among older Americans are also singled out.


However, a lot of the recent coverage focuses on the inadequacy of the 401k to fund a secure retirement.

That makes sense. Wasn't a decline inevitable when the burden for retirement savings shifted from the employers via pension plans to the employees via 401k's, requiring everyone to be an investment expert when even the experts can't agree on how much to save and how to invest it?


In fact, the 401k was not intended to take the place of pensions and become the primary retirement vehicle for the majority of workers. Rather, it was designed as a perk for those at the top. And those are the people getting the biggest benefit. Ghilarducci says 80% of the tax break for 401k contributions goes to the top 20% of earners.


She has proposed a national annuity plan, funded by employee contributions, to supplement Social Security. California and several other states are looking into plans like that, says McClatchy Newspapers.


As things stand right now, you're pretty much on your own. What can you do?

  • Sign up for the 401k at work if there is one (or, if you're self-employed, create a solo 401k) and have no less than 10% of your income automatically deposited into it. Increase the percentage as your income grows.
  • Never borrow from that fund (although one in four households tap their 401k's to the tune of $70 billion a year, says HeroWallet). It's not a house down payment or college education fund or a backup if your job disappears.
  • Avoid debt, and pay off what you have as you continue to fully fund your retirement plan. Imagine the financial flexibility of retiring without a mortgage payment.
  • Seek professional help. Find a fee-only adviser who is qualified to help you analyze your savings plan as you near your preferred retirement age.

What's your retirement goal? How confident are you that you're going to reach it?


More on MSN Money:


Mar 6, 2013 7:06PM
The money people collect from social security is not a government benefit like the money given to people on social services. This is our money that came directly out of our paychecks. But the government treats it like it is their money. If this was a private plan, all the money you paid in would be all yours.
Mar 6, 2013 5:49PM
All I want is the money I have contributed to the system for the past 35 years.  Not a penny more or less, and I will invest it for the next 5-10 years will have a very nice retirement.  Finally stop raising our taxes, federal, state, property, gasoline, sales, and tolls on bridges $20 a day in NYC.  Then people will have plenty of money.  All you people getting government help, get a job and get off your a-s-s
Mar 6, 2013 8:25PM
Hey. today was my magic day I've planned and scrimped for 35  .... hit 1 million in my 401k, at 55. Market will probably correct now, but I saw it once !

 How did I do this ? Am I some upper management guy or investment banker ?  Nope. Non management guy that put the maximum I was allowed ad never pulled a dime. Got lucky on some company stock which helped, but like everyone I also made some poor picks. Slow and steady, the max allowed.

 So I drive old cars and live in a house worth about half I could qualify for, but decided to live within my means all these years while my boomer co-workers drove the best cars, vacations, hit the best restaurants regularly, etc. I did a lot of those things, just in moderation over the decades so it isn't like I really gave up much. It can be done, still in shock I finally got there; if I did it, you can. 

Good luck to you all on your life journey.

Mar 6, 2013 5:58PM
Who are they kidding?  A National Annuity Plan, as if we should give the government even more money to miss manage.  Funny how the government thinks it is a great idea for us to give them more money but never a good idea for them to leave us keep more of our money. 
Mar 6, 2013 2:08PM
" a national annuity plan, funded by employee contributions, to supplement Social Security." Don't I pay enough money already to fund other people's retirement? No one will fund mine. I should keep my money and use it for my retirement. Personal responsibility - what an outdated concept.
Mar 6, 2013 7:24PM
It seems the middle-income jobs have left the country and the CEOs, CFOs, and VPs are doing very well.  Not everyone has the intellect, ability, or desire to be the top-dog in business.  But how can these people live above poverty-level with no income?  And how can the middle-class, as in the past, fund Social Security for the next generation when well-paying jobs are moved off-shore?  Creating more Big Government is not the answer--someone still has to "pay" the government.  I'm tired of my Social Security Benefit being degraded by life-time politicians who are out of touch with the reality of everyday Americans.  We have become a nation of "Haves" and "Have-Nots."
Mar 6, 2013 6:59PM
they can lose me as a recipient....just pay back what they took from me and my employers over the past 45 years...i can take care of myself...screw this rotten government and it's phony social and security plans...consuming and destroying all income of the citizens is neither social or security
I am retired from 22years in the military.  I am waiting for the government to cut my retirement check just like they did not provide free medical care.  Our government does not make good on their promises unless you are a rich international corporation.  Then you are too big to fail.
Mar 6, 2013 6:30PM
My so called Cadillac retirement plan at a power company is turning quickly into a Edsel, absolutely worthless as the company gets down and dirty to fund the upper management bonus programs we get to get along on cash balance pregrams that will not pay the insurance let alone the cost of daily life.  I do not expect to see any of the SSA moneys I put in for almost 40 years, pretty much stolen by the politicians and now they want ever more, they can go pack sand.
Mar 6, 2013 7:32PM
" a national annuity plan, funded by employee contributions, to supplement Social Security." 

Wouldn't that just be another Social Security program? Create a second when the first didn't work?
Mar 6, 2013 1:00PM
Already retired and sleeping fine thank you. I'm done worrying about sh*t I have no control over.
Mar 6, 2013 6:08PM
Baby boomers need to unite and force the privately owned Federal Reserve Bank to pay up for all the past taxes it owes. They have never paid a single cent in taxes. Not only that the Federal Reserve Bank sent its people into our treasury and took 8 TRILLION DOLLARS IN NEWLY PRINTED CURRENCY WITHOUT REASON. 
Wake up America. Youve been had, If you dont wake up you will die in your sleep. 
Mar 6, 2013 6:19PM

Pension plans were deferred compensation.  When companies ditched them, they kept the money.  Workers should have gotten that money.  Instead, they took a pay cut without complaint because it was money they weren't going to see for years.  It's not a coincidence that 70% of people were prepared for retirement in the 80's, they were getting a pension.


Companies got rid of pensions because you can't budget a defined benefit for an undefined amount of time - ie workers living a lot longer in retirement.  They should have made the pension a defined contribution plan - they put a certain amount away, when you retire, you get it and then you are on your own.

Mar 6, 2013 8:44PM
Young people are not going to like this, the boomers will have a great deal of political clout in the coming years. Politicians are not going to go there with the grey panthers. Washington will have to figure out other ways to accomplish their goals other than on the backs of seniors!
Mar 6, 2013 9:12PM
I was going to add to this but..everyone has most of the bases covered already...we let this government get out of hand and now are paying for it.
Mar 6, 2013 7:44PM
Well if the bankers and wall streeters along with both their Democrat and Republican lackeys had not screwed the economy up for the last 6-7 years the boomers might have been in a different position.
Mar 7, 2013 8:01AM
WTF??  Are these people all blind or just plain stupid?? This whole scenario is really a lot less complicated to analyze than all these "experts" seem to think it is. With both employees and employers contributing equally to the Social Security fund, and had those funds been, (A) left alone and not been STOLEN (equals taken and not repaid) by the government for things that had nothing to do with Social Security, and, (B) placed in manner that allowed these funds to grow, this whole Social Security funding would be a moot point!!  Further, these idiots in the Congress are trying to make Social Security a part of the debt issue and it is totally separate and aside from anything to do with the debt, the budget or any of the other BS that they are trying to weave into their web of deceit, lies and inept management of this country!!  And I'm sure that there are some in this collection of buffoons that we call the House of Representatives and the Senate that must actually wonder why the Congress has a public opinion rating of 8%. That in itself shows me how on the ball they are.
Mar 6, 2013 7:05PM
National annuity program....These crooks in Washington just never about running Social Security as a individual retirement account instead of a cash cow.  Social Security is unconstitutional anyway same as Obama care.  I'll keep my money thank you. 
Mar 6, 2013 9:13PM
Sorry.  I was taught by my parents that our future is what YOU make of it.  I don't know if I will ever draw Social Security (even though I have paid in for over 40 years), but I have my own retirement funds and SS would just be an added bonus.  Who knows ?  It might even pay the electic bill.
Mar 6, 2013 7:26PM

Part of the problem I see is that the switch was made from pensions to 401(k) programs without the requisite education of workers as to what it means and how they have to be serious about planning for and funding their own retirement plans. Workers were also inadequately (or not at all) educated about how to invest and manage their deferred compensation funds.


As more and more of the boomers have to stop working, voluntarily or involuntarily, there are going to be, sadly, many thousands of people who will be having very serious problems making ends meet. Social Security was never meant to be someone's only source of retirement income, yet that is all thatmillions of boomer will have when they stop working.

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