Although many Americans think they are financially savvy, new data shows how the group closest to retirement, baby boomers, struggles with retirement fundamentals and is not saving enough for their golden years.

New data released by the Indexed Annuity Leadership Council shows that many baby boomers aren’t financially prepared for retirement — they have little saved, are consumed about lifetime income options and don’t know how much money they need to live comfortably.

  • 60 percent of baby boomers think they need less than $1 million in retirement, when in reality at least a quarter of a million will be needed for health care costs alone
  • 1 in 4 baby boomers have less than $5,000 saved for retirement 
  • Nearly half of baby boomers don’t know that there are financial products that deliver lifetime income
  • 2 out of 5 baby boomers think they will get more money from Social Security than the average monthly payment

Many baby boomers are banking on Social Security as a main stream of money for retirement. Yet, more than half of boomers cannot correctly guess the average monthly Social Security payment. In fact, many think the average monthly payment is $500 more than it actually is — a budget miscalculation that will leave them almost a quarter of a million dollars short over a 30-year retirement. 

Budgeting troubles continue when boomers are asked what they would do with a large cash gift as retirement doesn’t come to mind for many.

  • 40 percent of baby boomers prioritize lifestyle purchases over retirement savings
  • 52 percent of baby boomers have debt to pay down before saving for retirement 

“Struggling to estimate how much money will be needed during retirement or sifting through different financial products can feel like a big hurdle, especially for those close to retirement,” says Jim Poolman, executive director of the IALC. “The good news is it’s fairly easy to increase your retirement IQ. Start with the basics of estimating retirement costs and getting a balanced portfolio in place.”  

Ensuring savings can fulfill etirement expectations starts with calculating how much a retiree will need for the entire length of their retirement. They will need to take into account their lifestyle budget, Social Security benefits available to them and any lifetime income streams. Once they know how much they’ll need, they can evaluate their current savings plan and how the products in their portfolio are helping them achieve your retirement goals. 

See also:

The wildcard of retirement planning: health care expenses

Baby boomers in worsening shape for retirement

A tale of woes: boomers trying to build a retirement nest egg