As retirement nears Boomers’ concerns grow

The Baby Boomers are thinking retirement.

In fact over the next decade they will begin to retire in large numbers.

Today’s Baby Boomers, “constitute the core of the prime working age population, helping to fuel the longest peacetime economic expansion in our history,” according to an AARP Public Policy Institute study entitled; “Boomers Approaching Midlife: How Secure a Future?”

But are they prepared for a life without work? The AARP study concludes that while most boomers will be better off in retirement than some people think, a substantial number of them will retire with no private pension, little or no retirement savings, and with the prospect of living longer with meager resources.

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The AARP study, using statistics from the U.S. Department of Labor, illustrates quite clearly the vulnerability of the Baby Boomer generation. Among the findings of the study:

Two-fifths to one-half of all boomers lack current pension coverage.

Of those with pension coverage, about 85 percent are vested, i.e., have the right to receive pension benefits in the future.

About half of all boomers are vested in a pension plan. But many boomers can look forward to only modest levels of pension benefits, and most do not have benefits indexed for inflation.

In recent years, according to the AARP study, there has been a trend away from employer responsibility and risk-bearing and toward individuals bearing greater individual responsibility and risk. But while greater individual risk-bearing is the trend, there has been only a modest positive trend since 1987 in people saving cash payouts from pensions.

Less than 30 percent of lump-sum distributions received are rolled over into IRAs.

Only slightly over half of lump-sum dollars are rolled over into IRAs.

Legislation has made it easier to access funds before retirement, so the slight positive savings trend may reverse in the future.

The AARP study also reaches the following conclusions with regard to savings, wealth, employment and retirement:

Baby Boomers are more likely to have financial assets than pensions today.

Most households have few financial assets.

Most wealth is in the form of home equity.

Baby Boomers are increasingly likely to own stock.

Even the top 10 percent of Baby Boomers have only modest financial assets.

Only one-quarter of Baby Boomers expect large or moderate inheritances.

Baby Boomers’ labor force participation is high but will decline as they age.

Baby Boomers make up over one-third of contingent workers.

Most pre-retirees say they want to work in retirement.

Few pre-retirees think they could move to less demanding work with their current employer, even at less pay.

Another AARP survey suggests that women are less confident about their financial situation as they approach retirement. Among the findings of “Survey for Retirement: How Are Women Doing?”

Women are less confident than men about their retirement.

Women are more likely to feel too far behind to catch up.

Outliving assets is more of a concern for women than men.

Women begin saving for retirement at older ages than men.

More women than men say that they can’t afford to save.

In terms of retirement accounts, the survey found:

Despite equal contribution rates, women have lower 401 (k) balances than men because they earn less.

Women and men are about equally likely to own Individual Retirement Accounts (IRAs), but women have less in them.

Women are less likely than men to retain their lump sum distributions for retirement.

There is little gender difference at the low end of retirement savings – many women and men have next to nothing in their retirement plans.

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