NU Online News Service, Jan. 8, 2004, 6:01 p.m. EST — Washington About 50% of the baby boomers likely will face a drop in their standard of living at retirement, and many will find themselves largely dependent on government benefits, according to a report from the Congressional Budget Office.[@@]
The CBO warns in an analysis of recent research on boomers’ retirement preparedness that the situation may become even worse.
Nearly all of the studies that the CBO reviewed assume that Social Security and other government benefits will be paid as required by current law, but the CBO points out that budgetary pressures could cut future benefit levels.
“Because many baby boomers are likely to depend heavily on government benefits for the bulk of their income in retirement, their prospects may be less rosy than recent studies imply,” the CBO says.
Moreover, the CBO says, expectations about future benefits influence consumers’ savings behavior.
“To the extent that boomers believe that they will receive all of the government benefits to which they would be entitled under current law, that expectation may induce them to save less than they would otherwise,” the CBO says.
“Conversely,” the CBO adds, “to the extent that they recognize the looming difficulties in funding those programs, they may increase their saving or retire at a later age than they had originally planned.”
Jack Dolan, a representative for the American Council of Life Insurers, Washington, says the CBO report reinforces the council’s message about the need for Congress to enhance retirement savings incentives.
Individuals should be encouraged to institute financial plans that address their long-term retirement needs, Dolan says.