Boomers Ill-Equipped For Retirement, Surveys Find
Boomers planning to have enough funds for retirement are in for a rude awakening, according to 2 newly released studies.
The reportsone from the AARP’s Public Policy Institute entitled, “Beyond 50: A Report to the Nation on Consumers in the Marketplace” and the other an annual “Retirement Preparedness Survey” from Merrill Lynchcollectively portray boomers as lacking the resources and time needed to prepare for retirement. Many, too, have misconceptions about investment vehicles and how much money they’ll need to have saved once they stop working.
“There’s a lack of understanding among boomers as to how much they have to fund for their retirement,” says Cynthia Hayes, first vice president, Employer Plan Solutions for the Retirement Group at New York-based Merrill Lynch. “In light of increasingly long life spans, that doesn’t bode well.”
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Adds George Gaberlavage, an associate director for AARP’s Public Policy Institute, Washington, D.C., “Boomers planning for retirement are faced with a far greater complexity of products and less time in which to make decisions about them than any previous generation. In terms of the future of retirement planning, that’s deadly.”
A companion AARP poll released with the “Beyond 50″ report supports Gaberlavage’s point. Of 1,900 individuals polled between March 25 and April 3, 2004, 27% of boomers (ages 40 to 57) say they are worse financial managers than their parents. The figure was more than twice the percentage of those aged 58 or greater (10%).
In the Merrill Lynch survey, 56% of respondents flagged personal savings and defined contribution plans, such as 401(k)s and 403(b)s, as their primary source of income. Yet at an average age of 46 and an income of $55,000, respondents accumulated average savings of $51,000enough for one year.
Respondents also said they expected to withdraw on average 21% of their savings each year during retirement (vs. the 4% to 6% that Merrill Lynch recommends). A large majority64%said they do not have a financial plan that identifies the amount of assets needed for retirement and how to build those assets.