Huge gap in Baby Boomers' retirement savings

This is a companion post to the one published by DCG this morning on more California seniors are working full-time into their late 60s and early 70s.
The reason for that is very simple: Most “baby boomers” in America have not saved, which means they must work even when they reach the standard retirement age.
Baby boomers are people born between the years 1946 and 1964, during the demographic post–World War II baby boom. In 2015, if your age is between 50 and 69, you are a boomer.
Kate Davidson reports for the Wall Street Journal, Oct. 26, 2015, that a new survey from BlackRock, the New York-based multinational investment management corporation and the world’s largest asset manager, found that there is huge “retirement gap” — the gap between Americans’ retirement expectations and how much they actually have in savings.
Fewer than a quarter (less than 25%) of Americans regularly set aside money into long-term savings or investment plans—yet 74% said they feel financially secure and “prepared to pursue their dreams.”
Put bluntly, many Americans are deluding themselves about being able to retire comfortably, or to retire at all.
Baby boomers, in particular, who are retiring in droves, face a staggering shortfall. People ages 55 to 64 who responded to BlackRock’s online survey say they expect to have about $45,000 in annual income in retirement. But the amount they have actually saved would only provide an estimated $9,129—a potential $36,371 gap.
Baby Boomers' retirement income gap
Here’s the breakdown of baby boomers into various groups:

  • Even “affluent” boomer retirees—those earning more than $250,000 a year—had not set aside enough to generate the income they say they would need to meet their retirement expectations. The “affluent” expect an annual retirement income of $60,000, but their actual savings would provide an actual retirement income of about $38,000 a year, leaving a retirement gap of $22,000.
  • “Nonaffluent” boomers — those earning less than $250,000 — are in a much worse strait. They expect an annual retirement income of almost $40,000, but their actual savings could provide an actual retirement income of $4,000 a year — a retirement gap of $36,000.
  • Although women expect a little less in retirement income than men, women also have a bigger retirement gap than men: $37,000 vs. $36,000.

BlackRock’s global chief investment strategist Russ Koesterich warns us that “The amount of money you need to generate a certain level of income is a lot higher than it used to be” because interest rates are so low. As a result, even if an investor has saved diligently for decades, the amount that a nest egg can generate is much smaller, which has come as “a very unpleasant surprise” to retirees.
Interest rates are near zero because the Federal Reserve is keeping them low. As things are, much of the federal government’s spending goes to paying the interest on America’s astronomical and ever-expanding national debt. Higher interest rates will mean an even bigger national debt.
The BlackRock survey polled 4,213 Americans out of more than 30,000 people around the world.
Nearly four in 10 people surveyed said they want to make sure they have enough cash saved as a security blanket for an emergency before they save for retirement. And the vast majority said they find it difficult to keep up with bills and save for retirement at the same time.
That squares with other recent data from U.S. Financial Diaries, a project of the New York University Financial Access Initiative and Center for Financial Services Innovation, which found many households are saving regularly for small, short-term emergencies, such as an unexpected dip in income or a spike in expenses. But those emergencies happen so often it prevents them from building up larger amounts to put toward long-term goals.
In an environment where cash is paying nothing, and bond yields are well below where they were for the past 40 or 50 years, Koesterich argued younger workers will need to embrace the volatility of the stock market if they want to generate the returns they need to live comfortably for decades in retirement.
What Koesterich and Wall St. Journal left out is another reason why Americans are finding it difficult to save in the amounts they should:

Taxes

Under the Obama administration, the federal government is hauling in more money in taxes than ever before. Tax revenue is at an all-time high: Over $2.67 trillion has come in so far this fiscal year, according to the latest Treasury Department report. That’s a record — in dollar terms — for the first 10 months of the year (the government’s fiscal year ends in September). Expect 2015 to finish at an all-time high. (CNN Money)
Despite record tax revenue, the Obama administration keeps spending more and is accumulating ever more debt, which will have to be repaid by the baby boomers’ children, grandchildren, and great grandchildren.
~Eowyn

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SimplyFred
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SimplyFred

1. Obama is deliberately bringing senior citizen immigrants to this country and placing them on Social Security. This program is nothing less than an act of genocide against the mostly white skinned baby boomer generation. 2. H 1 B Visa workers (sic) in this country are encouraged to bring relatives along with so they can feel comfortable. These relatives are always senior who go right on Social Security without putting a thin dime into the system. 3. A black male is 10X more likely, a brown male is 4X more likely to have AIDS than a white male. Soon as… Read more »

MeThePeople
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MeThePeople

My children have cashed in their 401K’s.
I did some side work to make ends meet in 2014 and the
IRS pounded me for $1000 in taxes and another $50 in penalties.
A lot of folks (not me) are hunting to eat and chopping wood for heat.
This is how The Federal government is destroying the middle class.

MA in MO
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I retired in ’08 and according to this article should be in poor house and on welfare, medicaid, etc. However, I am not and just spent $100 at the grocery store yesterday. Years ago that was two-weeks of groceries, not just one trip to the store, like yesterday. Of course, we live like no one else so we can live like no one else, but at least we have absolutely no money worries. When I retired we had no savings, the first few years were rough due to my husband’s medical expenses, but we made it and now, until the… Read more »

josephbc69
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No surprises here, are there? As I near 73, destined to continue working in my very shrunken residential improvement business, I cannot rely on gubbmint assistance as my mainstay, although it does help in a major way, in that it’s reliable. And, alhough the spirit is willing, the flesh weakens, even if people tell me I look fifteen years younger! Because I learned long ago that it’s not the age, but the mileage. I’ve been around the block many times –for which I’m grateful– and my guardian angels have given me nine lives, but I never rely on these as… Read more »

katrinawb
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Some of us work because it’s far better to have a purpose in life, a reason to get up in the morning, and the extra income added to SS certainly allows us to live better than we ever did when we were raising our family. It enables us to help our kids and be generous to our grandchildren. My husband feels mentally healthier and happier to continue working, which provides health insurance to bridge the gap in Medicare coverage. We are able to give more to our church, and to charities which is an added bonus. We know the day… Read more »

truckjunkie
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truckjunkie

Must be nice to save money. I had a savings account about 10 years ago,but it’s gone. I think you’re right,Katrina,working helps keep us healthy and slows the aging process. Seems like the majority of people I’ve known who retired seemed to age faster,were ill more often and lived much more passive lives than when they worked. Those factors all work together to take a person down faster once they retire. I’m not employed anymore,but I stay busy. BTW-Anyone who thinks surviving on Disability is an ongoing vacation from work-they’re dead wrong. I don’t have to worry about wasting away… Read more »

katrinawb
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Truckjunkie, my dad did what you are doing. Disability is no vacation, and it’s certainly never enough to get by on, and thankfully we were eight kids in the family and we helped out, and my mom went back to work in her 60’s. That left my dad to run the house, shop, prepare meals, do errands for family, friends and neighbors. He was always busy with one thing or another, and took up painting as a hobby, letter writing, which become sort of an avocation, and his ever-present NY Times crosswords (the only reason he ever bought the Times)… Read more »

katrinawb
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Sorry, meant to say “know nothing about”

huntingfororcs
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huntingfororcs

You must forgive me for asking this question but I am unclear on the concept of Social Security Disability, for I am baffled how someone on disability manages to be “busier than ever…run errands,fix things,start/repair their vehicles,haul or tow vehicles or trailers,pick things up or drop things off,and there’s the occasional road trip,to help with driving” or “run the house, shop, prepare meals, do errands for family, friends and neighbors…always busy with one thing or another, and took up painting as a hobby…and golf”? What kind of disability may I ask enables one to do all the above, but not… Read more »

katrinawb
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If you have never known anyone who has had, beginning at the age of 51, strokes, or series of strokes, massive heart attacks, lymphoma, and top it off with a quadruple bypass and an aortic aneurysm repair, but gets up despite his disabilities, to make what remains of his life meaningful then you couldn’t possibly understand. The fact the someone is no longer employable due to multiple disabilities and ill health does not preclude them from doing what they can to be productive human beings. Don’t worry. He wasn’t ripping off the system, or somehow taking advantage of the taxpayer.… Read more »

josephbc69
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Apropos your comment that in overcoming adversity we can actually become stronger and learn to be more resilent, I can say that certainly worked for me! I think that as children we need a mentor to give us guidance and develop a more positive response to all the ‘slings and arrows that will be our lot. In the flesh our parents, relatives, and friends may do this; for myself it was all these plus Christ. As I’ve told my students and at speeches, “I learned very little from all my success; it often distracted me from the real lessons at… Read more »

katrinawb
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Meant to day adversity, not diversity…..obviously.

katrinawb
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The question was asked in such a sarcastic, snarky manner that the insinuation was blatantly obvious. And so, sorry, Dr., I was compelled to answer in a similar manner. Sorry if that offends you and others. There are actually people who deserved SS disability, and thanks, I’m fully aware of the facts which you provided in order to educate me. Perhaps it has not occurred to some people that someone might hate the situation they find themselves in, and rail against it, and therefore push themselves beyond their limits to do something and be something, to make themselves useful, and… Read more »

Beano McReano
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Beano McReano

This illegal administration is milking you from the front door and the back door. You’re going to be left dry under the negro communist.
Taking record tax revenue (mostly all illegal) yet creating the highest debt than all previous presidents COMBINED!!
You know Negroes can’t do math do you?? Just thought I’d let you know.

truckjunkie
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truckjunkie

I’d like to throw my 2 cents worth in here. I COULD work,for a while. See,all the time I was in the workforce,I saw myself as a loser-I only had two jobs in my life that lasted over a year,and BOTH of them involved working for friends I’d known for 20 years,who “covered me”. Both of these people knew what my limits were and knew something of how to keep me going,but neither could offer me a chance to advance to a higher paying position,so I stuck with the low pay for as long as I could,for the “security”. I… Read more »

MA in MO
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I totally understand truckjunkie. My husband has the same issues but for different health reasons. We are just very fortunate to have found a way to live very very comfortably for little to no monetary outlay. There are plenty of these types of opportunity, a person just has to look for them.