Are Baby Boomers Well Prepared for Retirement?
The first wave of post-WWII baby boomers are now zooming past the retirement finish line. The Boomer generation spans about 18 years from 1946 to 1964, the oldest of which are now reaching retirement age. Now that many of the older Boomers are reaching early retirement age, are they really financially ready to exit the workforce and enter their golden years? The answer is both yes and no.
Working Into the Golden Years
In the last two years, from 2007 through the end of 2008, only less than half of eligible Boomers who could take early retirement before the age of 65 did actually fully retire. According to a study performed by MetLife Mature Market Institute, a Boomer survey response revealed that a majority of those eligible for retirement still work full or part time. Many of those eligible for retirement found that the economic climate was not yet ripe, and they were determined to remain in the workforce until the economy gets back on track and their retirement accounts receive that little extra “padding” from the continuing work years.
401(k) Plays a Major Role
Of particular interest in the decision to retire early or not was the 401(k) or other retirement account. In the last two years, and especially in 2008, many retirement savings accounts saw massive drops in value due to the stock market collapse. About half of the surveyed Boomers expressed that they were behind in their retirement savings, and only a small percentage reported that they had achieved their retirement savings goals.
The Economy Turned Retirement Haywire
In comparing the MetLife 2007 study with the 2008 study, it appears that in 2007, 15% of those who would reach the early retirement age of 62 planned to fully retire. A year later, only 11% of that small percentage actually did fully retire, while the rest continued to work because of the economy. These workers were faced with a decision to continue full or part time work due to sudden changes in the economic climate and the value of their retirement savings. Most of the older generation Boomers say they will now fully retire at age 66.
However, when the same question was asked of the older Boomer generation, their answer was prominently that most will not take early retirement at age 62. Rather, most say they plan to fully retire at age 64. The sentiment of the younger Boomers is that they have more time to get their retirement accounts in shape and in a position to retire.
What Nest Eggs are the Boomers Depending On?
While most retiring Boomer workers will collect Social Security benefits, what are some of the additional retirement savings or investments that Boomers will depend on after retirement?
- 401(k) – About 54% of surveyed Boomers said they have a 401(k) in which they contribute toward their retirement.
- IRA – Also, about 51% said they have an IRA in addition to, or rather than, a 401(k) retirement savings.
- Defined Pension – Less than half, 49%, said they will have a defined retirement pension from their workplace.
- Stocks, Bonds, Mutual Funds – 40% of those surveyed own stocks, while another 38% have invested in mutual funds. Fewer, only 27%, own bonds for their retirement plans.
- Annuities – 37% of Boomers have purchased annuities that will pay them a regular retirement income.
As many early generation Boomers are experiencing, economic climates can play a big part in the decision to retire. A retirement savings plan should include a broad spectrum of financial products that provide growth, while also protecting value in economic downfalls. Anyone in the Boomer generation nearing retirement should have a good asset management company such as www.iamllc.biz or a wealth manager as www.kenhimmler.com on their side to formulate a solid financial strategy toward retirement.
Authored by Kenneth Himmler, Sr.
Tags: early retirement, retirement, retirement accounts, retirement savings