Baby Boomers Head for Bust in Retirement
Mark Trumbull, writer of The Christian Science Monitor, The Christian Science Monitor
Baby boomers may be headed down the homestretch for retirement, but many will have to keep right on working.
The typical boomer household has just $35,000 saved for retirement - far too little to fund the lifestyle most plan - according to a recently released survey sponsored by mutual fund company Scudder, Stevens & Clark.
"This is going to become a crisis if something doesn't change," warns Christopher Hayes, executive director of the National Center for Women and Retirement Research at Long Island University in Southampton, N.Y., which conducted the survey. A lack of thrift is not unique to the baby boom generation, currently between 33 and 51. But for this horde of 76 million Americans, it signals that retirement may be redefined to include at least part-time work. "It's sort of like planning a trip with no destination in mind," says Paul Yakoboski, a retirement specialist at the Employment Benefits Research Institute in Washington. "The overwhelming majority have never sat down and tried to calculate what they need to save." It's not too late to start. Most boomers have two decades or more to go. But a 45-year-old couple with the median savings - $35,000 - must get busy. That amount, invested for 22 years at an 8 percent annual return, will fund only five years of retirement at $35,000 annual income, according to a planning kit developed by Scudder. To fund another 15 years of retirement (excluding Social Security and traditional pensions), the couple would need to save 15 percent of their income, the Scudder kit suggests. Conclusion: This boomer couple can meet their goal - with big sacrifices. But many households fall ahead or behind the curve. About 20 percent have less than $10,000 saved. Others are on track. Jack Warren, a mechanic at a Ford assembly plant near Clevelend, plows some of each paycheck into the automaker's voluntary 401(k) plan for a retirement that is 10 years away. And his wife commutes 65 miles each way to a low-paying school job. It doesn't make much financial sense for the present, he says, but it gives her a pension to combine with his. Despite a mortgage and a home-equity loan to pay off plus a daughter just finishing high school, he is optimistic about retirement income. "Hopefully it'll be reasonable," Mr. Warren says. People with a savings shortfall can draw several lessons from the Warrens and other successful savers. Save. "What's my most important bill? It's myself, my future," says Dudley Ladd, a managing director at Scudder. …