Baby Boomers constitute a veritable tsunami of retirees, with the potential to flood health care systems, up-end public policy, overwhelm Social Security, and tax the nation's Medicare and other services as no previous generation has.
The most pressing concern for Baby Boomers and for those who care for and about them, is their vast potential to outlive their money. To get a handle on Baby Boomers' retirement outlook, we present some common but unhelpful myths. Then we will look at some potentially helpful remedial steps.
Myths and Facts
Myth #1: Retirement means an idyllic, work-free life.
Fact: Baby Boomers themselves see what's wrong with this picture.
In the past, it was possible for middle-class Americans to stop working when they retired and to spend their days golfing, gardening, and playing cards over at the Florida condo's recreation hall. Their idyllic, work-free lives were only interrupted by travel and visits from adult children and grandchildren.
Although this lifestyle will be achieved by some, it will not be attained by most. According to Catherine Collinson, President of the Transamerica Center for Retirement Studies, a Harris Poll conducted for the Center showed that 65% of Baby Boomer workers plan to work past age 65 or do not plan to stop working at all! The majority know they will need the income and/or the health benefits.
Collinson said, "For most Baby Boomers, retirement is no longer a point in time at which one immediately stops working." Rather, she says most Baby Boomers "envision a phased transition into retirement during which they will either continue working, reduce hours with more leisure time to enjoy life, or work in a different capacity that is less demanding and/or brings greater personal satisfaction." They may very well embark on an "encore" career.
Myth #2: Baby Boomers have enough savings to cover the extra years of longevity science has granted them.
Fact: Baby Boomers have not saved enough for retirement.
The Harris Poll found that the median amount of savings for Baby Boomers (savings which include home equity, stocks, savings accounts, IRAs, mutual funds, life insurance, annuities, and 401(k)s) is $127,000. This 2014 figure is up from the 2007 figure of $75,000 but it is not enough to fund a retirement of many years.
The good news about work-administered 401(k)s is that 71% of Baby Boomers have access to them through their place of employment, and 81% who are eligible access these plans.
The bad news is that nearly a quarter of such Baby Boomers have compromised their 401(k)s by taking out loans or withdrawing early.
In any case, most Baby Boomers' savings, in all forms, are inadequate to fund long-term retirement-a necessity as life expectancy continues to rise.
Myth #3: Social Security will see them through.
Fact: Social Security is, in fact, Social Insecurity.
Although a significant portion of Baby Boomers foresees Social Security as their main source of income in retirement (36% according to the Harris Poll) in fact Social Security is expected to pay only about three-quarters of its scheduled benefits by about 2030. Although governmental steps may be taken to remedy this, Social Security is looking more like Social Insecurity. At its best, it does not rival pre-retirement income.
Myth #4: Baby Boomers will enjoy a similar lifestyle to the one they had when they were working.
Fact: Many are likely to see a downturn in lifestyle.
Although Collinson notes in her report that Baby Boomers are split in half as to whether they will be able to live at the same level they are living at now when they retire, it looks unlikely, especially if they are depending on Social Security, fast-evaporating pension programs, and their own inadequate savings.
Myth #5: Baby Boomers have read enough about retirement and know what they to live on.
Fact: Some, yes. Most, no.
Some of the expectations outlined above show that Baby Boomers do not really understand their situation as far as retirement goes.
When asked in the Harris Poll, for example, how much money they would need for a comfortable retirement, most of them named high figures, but then they admitted they had merely taken a guess as to how much they might need.
What Is To Be Done?
There are important steps Baby Boomers can take to help offset the financial difficulties of long term retirement. Among them are:
Senior workers are very valuable to their employers. According to the Harris Poll, 87% of employers say they value their older workers as mentors, trainers, and repositories of job expertise and organizational knowledge. 88% of employers would like to keep their Baby Boomer employees. Yet the statistics on older workers indicate that they don't feel that welcome about continuing to work for their employers. Only 73% think their employers are supportive of them continuing in the workplace.
For example, if someone has $100,000 at age 65 and decides to retire, they can only take out about $585 each month if they want the fund to last until they're 90 (earning 5% per annum). If they work another ten years and save $500 per month, the $100k nest egg will grow to about $248,000 (earning 5.25%) and they can take out $1,950 per month until age 90.
Catherine Collinson, "Baby Boomer Workers Are Revolutionizing Retirement. Are They and Their Employers Ready?" The 15th Annual Transamerica Retirement Survey. Transamerica Center for Retirement Studies and Harris Poll, December 2014. Available online at: