Although baby boomers feel they will need an average of $750,000 in order to live comfortably in retirement, they have saved an average of $275,000.
The discrepancy between what boomers feel they need and what they actually have was highlighted in a recent Investor Index Survey released by broker-dealer T.D. Ameritrade, Inc., a subsidiary of TD Ameritrade Holding Corporation.
Results of the survey indicate that many baby boomers need to utilize all of their retirement planning options, including various types of annuities, as well as independent and employer-sponsored defined contribution (DC) plans.
The gaping shortfall should spur boomers to begin actively trying to close the gap. One possible solution, the survey suggests, is taking advantage of catch-up contribution clauses in DC plans. Catch-up contributions allow investors over the age of 50 to make additional contributions over the regular limits. For 2012, IRA contributions limits are $5,000 with a $1,000 catch-up contribution. For 2013, 401(k) contributions limits are $17,500 with a $5,500 catch-up contribution while IRA contributions in 2013 are $5,500 with a $1,000 contribution.
Industry experts urge baby boomers to be aware that “every dollar counts” while saving for retirement and utilizing a catch-up clause could make a significant difference when the investment begins to draw down.
The online survey was conducted with 2,000 baby boomers during October of 2012 and was conducted for TD Ameritrade by Head Research.