Study: Savings May Run Dry for Forty-Seven Percent of Boomers

07/21/2010 Share 0 comments

A recent study reported what we already know -- we are not saving early enough and safely enough and, as a result, retirement money could run out early.

Following the job and investing horrors of the last three years, many Americans fear they will end up in retirement like Old Mother Hubbard. 47% of early baby boomers, now 56-62 years old, are not expected to have enough money to cover basic living expenses like food, utilities and health care through retirement.

Members of Generation X, ranging from 36-45 years old, should be in better shape because they have more time to prepare. Nevertheless, 44.5% of them are also expected to run out of money, the study said.

People haven’t saved enough and have invested poorly often skipping investing when young and then around 40 being too aggressive.

Prior to the recession, many baby boomers were trying to catch up for years of deficient savings by investing heavily in stocks. But the approach blew up after 2007, when the stock market crashed 56%. The study found that one in five people over age 55 had 90% of their retirement savings in the stock market.

The people in the best shape with savings tend to have 401k plans. With such plans, people save regularly, while people who must go on their own to a broker or mutual fund company to start an IRA tend to procrastinate.

More and more large employers are removing 3-6% of their employees’ money from paychecks and placing it directly into a 401k. And the money is being routed into so-called target-date mutual funds that invest in a combination of stocks and bonds designed to get people ready for retirement Because this happens automatically, people avoid their No. 1 retirement planning enemy: procrastination. Although people can opt out of the 401k plans, fewer than 10% do, according to Hewitt Associates research.

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