By Craig Erwin, Ph.D.
When I started my first full-time job in 1981 I was promised a pension. By the time I started my second job a few years later, pensions were disappearing fast, replaced by 401(k)s and 403(b)s.
In August the Transamerica Center for Retirement Studies released its latest findings on the state of retirement in the U.S. The Center found a sharp contrast between Generation Z and Baby Boomers. Much younger, Gen Zers are just beginning to save for retirement. Most plan to fund their own retirement, in part because Social Security reserves are expected to be depleted by the time they retire. Plus, very few will have pensions. They are likely to use mainly 401(k)s, 403(b)s, and IRAs to build retirement wealth.
For many Baby Boomers, Social Security will be their biggest or only source of funds in retirement. Although some have been saving and investing using 401(k)s, 403(b)s, IRAs, and the like, many did not have such savings vehicles available to them when they began their careers. Congress did not pass legislation creating IRAs until 1974 and 401(k)s until 1978.
According to Transamerica, the median retirement savings for Boomers today is $202,000. Although you might think that’s a lot, $202,000 won’t go far. If you retire at 65 and live till 90, $202,000 will only provide about $673 a month. And taxes may reduce that amount.
Boomers are at, near, or past retirement age and yet 42% of them, according to a survey by Comet, have nothing saved for retirement. I bet they wish they had started preparing for retirement earlier and saved more. It’s hard to fathom that IRAs have been available since 1974 and yet nearly half of Boomers don’t have one.
Retirement isn’t going to be much fun for Boomers totally dependent on Social Security. They won’t be vacationing in Paris. Sadly, they will be lucky to keep the lights on and something in the refrigerator. If they are still working and haven’t prepared for retirement, they are rapidly running out of time to do anything. Gen Zers have much more time. But they can’t afford to dawdle.
What matters most is that, no matter your age, if you are not saving and investing, you must start now. You are never too young to start.
How confident are you that you’ll be prepared to retire? What do you wish you’d done differently to prepare?
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