More than 75 million Baby Boomers are currently retired or headed for retirement, and they’re spending their non-working years like no other generation before them.
As they launch their next chapter, though, Boomers should be aware of the following challenges and opportunities in their path:
- Most Boomers don’t know how much they need to retire. According to a Transamerica study, just 49 percent of Boomers have used a retirement calculator to determine how large their nest egg needs to be.
- Boomers are facing a retirement savings shortfall. Surprisingly, nearly 1 in 5 Boomers (20 percent) don’t contribute anything to a retirement plan, like a 401(k). Even savers aren’t putting enough away: the median savings for Boomers is just $132,000. Using a 4 percent drawdown rate in retirement, that’s only enough for an income of a little over $5,000 a year.
- Social Security won’t be enough. On average, Social Security replaces only about 40 percent of a recipient’s pre-retirement income. The average worker benefit in 2016 was just $1,321 a month. Additionally, the Congressional Budget Office estimates that, without any changes to the program, Social Security benefits for retirees could be cut by 29 percent in 2030.
- Working longer is popular, but it isn’t always an option. Many Baby Boomers—37 percent—plan to work beyond the age of 65, more than any previous generation, according to Gallup. Yet, only 18 percent of workers actually do so, for reasons ranging from health problems to job loss.
- Catch-up contributions can help. Workers who find themselves behind on retirement savings can contribute an additional $6,000 to their 401(k) plans every year once they hit 50. Doing that every year, for 15 years, with an average 6 percent return, can boost retirement savings by an additional $139,658.