Middle-income boomers forced to rethink retirement

by Jim Sloan

Baby Boomers are tightening their belts and maintaining their savings rates as a result of the financial collapse three years ago that battered their retirement savings accounts, diminished their real estate investments and made them rethink the type and duration of their impending retirement.

A new study from the Bankers Life and Casualty Company painted a pretty bleak picture of U.S. residents between the ages of 47 and 65 who earn between $25,000 and $75,000. For instance, nearly 70 percent have experienced a decline in their retirement savings account since 2008, 21 percent have not seen any recovery in their investments, and 14 percent have no retirement savings account at all.

But they are a plucky bunch, this group of 78 million people born between 1946 and 1964. Nearly all of those who participate in some kind of employer-sponsored retirement savings account either maintained or increased their savings rates even as many of the employers cut back or eliminated their own contributions.

The shift to individual responsibility

In recent decades, the responsibility for retirement has been shifting from employers and institutions to individuals. Pensions have declined and the 401(k) savings account and other individual saving mechanisms and investments have taken their place.

The big test for how this shift is working is the baby boomer generation, whose oldest members turn 65 this year and whose aging members will increase the nation's over-65 population from 14 percent to 21 percent in the coming years.

Their numbers will test the capacity of Social Security and Medicare, but also go a long way to determining what retirement will "look like" for a generation that has had to save up for its own golden years. While retirement for previous generations involved slowing down, moving to a retirement community or being cared for by family, this study found that baby boomers expect something different, including:

  • A more active lifestyle: More than half are looking forward to retirement, but one if four are uncertain.
  • Work: Three out of four of the 500 respondents in the study expect to work in retirement and most for financial reasons.
  • Concern about money: Whether it's interest rates, cd rates or money market rates, nearly three-fourths say their financial situation--not their age--will determine when they retire.

Falling behind on savings and investments

The study also found that many boomers feel they haven't saved enough for retirement, for instance:

  • Two-thirds feel they are behind their savings rates.
  • Half are not confident they've put enough in their money market accounts, retirement accounts, certificate of deposit or other investments for a comfortable retirement.
  • More than half have less than $100,000 in their retirement investments; one fifth have less than $10,000.
  • More than three-quarters are concerned about health-care expenses, inflation and long lives gobbling up their retirement savings.

The impact of the economy

In addition to the nearly 70 percent who saw their retirement investments decline in value, many say they've had to recalculate their retirement date, with 80 percent putting it off for an average of five years.

In addition, more than half have cut back on discretionary spending--such as dining out--and 43 percent have reduced their credit card debit. Two-thirds are trying to reduce their health-care costs by delaying treatment or moving to a cheaper health care plan.

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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