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Retirement Planning > Retirement Investing

Middle-Income Boomers Face ‘New Retirement’

By Michael S. Fischer

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Middle-income baby boomers remain unconvinced about a nationwide recovery from the financial crisis, and are unsure about their chances for a secure retirement, according to recent study commissioned by the Bankers Life Center for a Secure Retirement.

This lack of confidence has changed boomers’ attitudes and behaviors about investing and saving.

The Blackstone Group conducted an internet-based survey in October of a nationwide sample of 1,000 Americans age 52 to 70 with an annual household income of between $30,000 and $100,000. The survey included questions about middle-income boomers’ feelings at three points in time: in 2006 (before the financial crisis), during the financial crisis and today.

Only 51% of respondents felt the economy had recovered somewhat from the financial crisis, and 2% said it had fully recovered. The remaining 47% did not believe the economy had recovered at all.

Two-thirds of boomers said they had not personally benefited from any economic recovery since 2007. Of these, 52% reported that their savings were lower today than before the financial crisis.

A Fraught Retirement

The CSR noted in a statement that before the crash, middle-income boomers were already contending with a “new retirement” stemming from changes to their retirement programs, as employers shifted away from defined benefit plans such as pensions to defined contribution plans, primarily 401(k) plans.

Today, middle-income boomers’ outlook for a secure retirement is full of uncertainty, according to the survey.

Only 31% felt well prepared or very well prepared for retirement, down from 41% before the financial crisis. Confidence that retirement would be personally satisfying was also down, to 37% from 44% before the crisis.

A recent report showed that boomers had many goals still unmet for a comfortable retirement.

The CSR survey found that 57% of boomers felt confident in meeting daily financial obligations, compared with 65% before the crisis.

Still, respondents’ confidence in their ability to make smart investments decisions were near pre-crisis levels, 47% today versus 50%.

The survey found that middle-income boomers were adapting their expectations to meet the realities of this new retirement.

Sixty-eight percent of respondents said they were worried about another financial crisis in their lifetime.

More than eight in 10 reported taking actions to manage their spending behavior since the start of the 2007 crisis, such as reducing their discretionary expenses and recurring monthly expenses or creating and maintaining a household budget.

Twenty-eight percent said they had built up an emergency fund, and 17% were saving a larger percentage of their paycheck than before the crisis.

A recent report examined how prepared Americans are for retirement.

Three-quarters of boomers in the CSR study reported that they had changed their investment behavior as a result of the financial crisis, most often taking defensive measures: 28% were making more conservative investment choices and 18% were regularly reviewing and adjusting investments.

One in four said they no longer invested at all.

Just about all of middle-income boomers said they still planned to retire, but retirement will look different that before the crisis in terms of income, work and debt.

Thirty-eight percent of respondents said they expected to rely on Social Security for their primary source of retirement income, compared with 30% before the crisis, while 19% both before the crisis and today cited an employer pension.

Before the crisis, about a third of middle-income boomers expected to work full time or part time in retirement. Today, nearly half said they expected to work at least part time.

Only 34% of boomers said they would retire free of debt, down from 45% before the crisis.

Ten years ago, 23% expected to have savings to pass along to heirs, while today only 16% said they would leave an inheritance.

— Check out 25 Best Countries for Retirement Security: 2017 on ThinkAdvisor.

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