The financial burden facing retiring baby boomers is often underestimated. Statistics from the Center for Retirement Research at Boston College (CRR) demonstrates how unprepared most elderly Americans are for retirement. These statistics were summarized by The Economist in an article titled, “Age May Well Wither Them”.
The CRR estimates that at least 52% of Americans will not be able to maintain their standard of living upon retirement. This includes retirees who receive a pension. However, the situation is even worse for Americans who do not receive a pension. It is estimated that 68% will fall short of their standard of living including those with defined-contribution plans such as a 401(K), IRA, 403(B).
Finally, nearly all retirees all counting on Social Security income. However, there are serious gaps in this so-called “safety-net”. Under Social Security, retirement income is based off of the average of a workers most productive 35 years of earnings. However, if a worker was not employed for the full 35 years due to extenuating circumstances then those years can really bring down an average. Even if you worked for a full 35 years, relying on Social Security benefits is not a safe bet. The program is underfunded by an estimated 25% and cuts are looming. The only way to truly be prepared for retirement is to plan ahead. Don’t wait until it is too late.