“April is National Financial Literacy Month, but this week is National Retirement Planning Week, which means it's time for yet another round of depressing statistics about how unprepared we all are for retirement.”
The baby boomers—those born between 1946 and 1964, ages 55 to 73—have about half (47%) of their group already in retirement.
CNBC’s recent article, “Baby boomers face retirement crisis—little savings, high health costs and unrealistic expectations,” says that the Insured Retirement Institute’s annual report, Boomer Expectations for Retirement, highlights the fundamental issues of too little savings, underestimating healthcare costs and unrealistic expectations of how much retirement income they’ll actually need.
Too little savings. The three "legs" of the retirement "stool" are Social Security, private pensions and personal savings. These aren’t in great shape, as the average Social Security check is $14,000 a year, and just 23% of boomers ages 56-61 expect to receive income from a private company pension plan, with only 38% of older boomers expecting a pension. Most boomers haven’t saved nearly enough in their personal savings, with 45% of boomers having absolutely nothing saved for retirement.
Underestimating health care costs. Retirees frequently underestimate health expenses, especially long-term care costs. Many people don't understand the system: half of the survey respondents say they haven’t calculated the cost of long-term care insurance, because they say they’ll rely on Medicare. However, Medicare has no coverage for long-term care. Just eight percent of boomers say they have purchased a long-term care policy.
Underestimating retirement income. The average amount spent by Americans 65-74 is $55,000 annually. However, most baby boomers don't believe they’ll need near that amount. To that point, about 60% say they will need less than that on which to live. Their backup plan is to downsize, go back to work, or ask their children for help.
Of those who aren’t confident they did an adequate job preparing for retirement, the top two things they wish they’d done differently were to have saved more (63%) and to have started saving earlier (58%).
Reference: CNBC (April 9, 2019) “Baby boomers face retirement crisis — little savings, high health costs and unrealistic expectations”