Today’s unfortunate truth is that 60% of baby boomers fear running out of cash in retirement more than they fear death itself.
And given that many baby boomers have very little saved for their golden years, they have good reason to be scared.
A recent Gallup poll found that 43% of workers aged 50-64 say they’ll be relying on Social Security for most of their income in retirement. Social Security was designed to replace about 40% of pre-retirement income, and how many people are ready to see their income drop by 60%? Healthcare alone is expected to cost an average 65-year old couple $377,000 over their retirement, and then you still have to add all of the other expenses of life such as housing, food, clothing, transportation and entertainment. That adds up to a lot.
The better news is that baby boomers, especially the younger ones, still have time to boost their savings and pull their long-term financial security out of peril. The Economic Policy Institute estimates that 41% of baby boomers have NO savings, while the median amount saved among those from 56-61 is a mere $17,000. The average amount saved is $163,577. If you spread that over 20 years, it works out to $681 a month in income, plus an average couple receiving $1360 a month each in Social Security. That’s not going to finance a lot of vacations in Florida. And while some costs drop after you stop working, some, like healthcare and leisure, will go up.
Savers can take measures to make themselves less reliant on Social Security. Begin by making the maximum contributions to IRAs and 401(k) accounts. If you are 50 or older, you can put up to $6500 per year in your IRA and up to $24,000 a year into a 401(k). If you max out the 401(k) for another 10 years and assume a modest 5% annual return, that’s another $302,000 in retirement savings.
For more information, please read:
Here’s Why 43% of Baby Boomers Could Wind Up Cash-Strapped in Retirement | The Motley Fool