Baby Boomers are generally defined as those persons born between 1946 and 1964. According to a recent report from the Congressional Budget Office, baby boomers are, overall, less likely to live their retirement years in poverty. That said, the same reports goes on to say that fully one quarter of all baby boomers have little or no retirement savings and, when questioned, seem to believe that they will be able to live on social security and their pensions.
Many experts feel these boomers are not looking at their retirement realistically.
Fully one quarter of the baby boomer generation appears likely to be forced to greatly reduce their standard of living during their retirement years based on their current rates of savings. Social security and retirement pensions will not be enough for most boomers to maintain the same standard of living they had while working.Living off Equity
Many boomers had apparently been counting on the equity in their home to provide at least some of their retirement income. This could still turn out to be the case, although the current depressed real estate market makes those prospects look dim for the foreseeable future.Extending Your Working Life
In order to make up the shortfall in their retirement savings, many baby boomers plan to continue working well into what might otherwise be thought of as their retirement years. For some this could provide a much-needed shot in the arm for their retirement.
However, many employers make it difficult for workers to continue working indefinitely. Also, as workers age, infirmities increase, making it difficult for some workers to work as long as they might have liked. Also, as the entire working landscape changes and new skills replace old ones, many workers may find themselves nudged out of the workplace simply because they are unable to keep up with the changes.
For those who can continue working, each year they earn an income past age 62 reduces their need for retirement savings by approximately 5%. This assumes a normal life expectancy of 82. Also, each year that a boomer continues working and not drawing on social security represents an increase in social security benefits once they finally do retire. This increase in benefits, added with the 5% per year reduction in overall retirement needs for each additional year worked, means that workers who can continue working (and saving) for even a few years past the traditional retirement age of 62 will not suffer as much as many experts currently believe.Will Social Security Be the Safety Net Many Boomers Are Counting On?
In order to keep social security solvent once the number of boomers on social security begins to overwhelm the system, some experts fear that the government may be forced to reduce certain payments that many boomers are desperately counting on. Should that prove to be the case, boomers who have not saved sufficient funds could be in for a rude awakening.What Are the Options?
Lower your standard of living now at least to some extent. Reduce unnecessary consumer expenditures. Get out of debt. Pay off credit cards and stop using credit cards to make consumer purchases. Make even a modest $50 a month increase in your mortgage payment, earmarking the additional funds to pay down principal. Taking that simple step can increase the amount of equity available in your home by several thousands of dollars after only a few years.
Make a plan. Look at your situation realistically and plan for the future. TSC Sources & Recommended Resources: