Trouble for Baby Boomers Retirees

Each generation in the U.S. has a higher standard of living than the previous generation. It isn’t always true from family to family, but as a nation that’s been the case. That trend is about to stop, according to a number of studies reviewed by The Washington Post. For many years there has been concern about the financial condition of Baby Boomers. But the financial calamities of the 2000s made the situation worse, and it now is looking to be much worse than analysts realized. The first half of the Baby Boomers is entering retirement on the heels of a secular bear market and housing market crash that destroyed a large portion of personal wealth. On top of that, the job market has been lousy, making it difficult for many to earn enough income to increase savings that will offset the other problems. For those who can save and invest, zero interest rates limit their potential returns. While some are calling on the government to provide some help, that’s unlikely because of its debt and deficit problems and the financial burden the senior programs will put on government spending in coming decades.

I’ve said for some time, even before publication in 2004 of The New Rules of Retirement, that you’re on your own for more of your retirement security. Americans become more and more on their own each year as support from employers and the government declines. That’s why I publish Retirement Watch and provide people with the tools and advice to improve all the financial aspects of retirement and retirement planning.

But now problems for future retirees seem to be closing in from all sides. Half of American workers have no retirement plans through their jobs, leaving people on their own to save for old age.

Meanwhile, four out of five private-sector workers with retirement plans at work have only 401(k)-type defined contribution accounts, rather than traditional pensions that pay retirees a fixed benefit for life. Numerous studies have found that workers with defined-contribution accounts often put aside too little money, make too many withdrawals or employ the wrong investment strategies to save enough for old age. 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.