Published November 2004

Hey, boomers, it’s not
your parents’ retirement

By Russ Lichty
Guest Columnist

In 2008 the first wave of baby boomers will turn 62 — now the earliest age at which U.S. workers can retire and qualify for some Social Security benefits. Awaiting them will be a very different retirement than that of their parents.

What challenges are in store for boomers? And how are they planning for retirement? First, here’s a look at the generation by the numbers:

• During the post-World War II years of 1946 to 1964, nearly 77 million children were born in the United States.
• Boomers are 40 to 58 years old today — roughly 26 percent of the U.S. population.
• The biggest contingent of boomers, about 28 percent, is in the 40 to 44 range.

The American Association of Retired Persons (www.aarp.org), Employee Benefit Research Institute (www.ebri.org), Roper Reports (www.roperasw.com) and many other organizations have studied the generation’s retirement challenges:

• Boomers are likely to live longer. A 65-year-old’s life expectancy has increased from 12-1/2 years in 1940 to 17-1/2 years today.
• Half of boomers don’t know how much income they’ll need in retirement.
• Two-thirds of today’s retirees get at least half of their income from Social Security. Boomers’ benefits will account for less than one-third, pressuring them to work longer and save more.
• Despite the importance of Social Security to retirement income, only 19 percent of workers know when they’ll be eligible for full Social Security benefits. (In 2004, the full retirement age is 65 years and four months. It gradually increases until it reaches 67 for people born after 1959.)
• Fifty-eight percent of workers say they are saving for retirement, yet the amount they have saved is low. And the proportion of workers who say they are saving for retirement is unchanged since 2001.
• Eighty percent of “retired” baby boomers expect to work at least part-time — either for enjoyment or out of financial necessity. So what’s a boomer to do about retirement planning? Many financial services companies provide online planners that can help calculate retirement needs. And boomers would be wise to seek the guidance of a financial services consultant about these issues:
• Investments — Are your investments appropriately allocated to meet your risk tolerance? Review your investments regularly to make adjustments as your needs change and as you near retirement.
• Pension and 401(k) benefits — How much you will receive from pension benefits? If your employer matches your 401(k) contribution, be sure you are taking advantage of the entire match.
• Working in retirement — The number of workers ages 20 to 34 has declined by 6 million while the number of people over 50 has increased by 12 million — trends that are expected to continue. As a result, the experience and skills of older workers should continue to be valuable commodities. If you intend to keep working past 65, now is the time to plan. Ask employment counselors and your company’s human resources department for advice. For example, you might want to train for a new career.
• Insurance and care-giving — As age and life expectancy increase, health-care needs increase. Longer life span can “sandwich” baby boomers between dependents at opposite ends of the spectrum — children on one end and elderly parents on the other. A study by the nonprofit Families and Work Institute in New York shows more adults are providing elder care. In 2002, 35 percent of workers provided regular care for a parent or in-law older than 65. Meanwhile, a national survey by the AARP and the National Alliance for Caregiving shows some adult children have cared for their elderly parents up to 20 years — longer than they spent raising their children. These trends call for boomers to have financial plans that include provisions for long-term care — for themselves and their parents.
• Estate planning — As baby boomers begin to inherit wealth from their parents, they will require expert financial advice to handle that exchange and to prepare for transition of their wealth to the next generation.

While the retirement challenges of the boomer generation are considerable, so are the opportunities. The time is now to make the most of your potential for the next decades.

Russ Lichty is a financial consultant for Ragen MacKenzie, a division of Wells Fargo Investments, in Everett. He can be reached at 425-304-6408 or by e-mail to Russell.C.Lichty@ragenmackenzie.com. This article is for information and education purposes only and should not be construed as tax or legal advice, which Wells Fargo and its affiliates can not provide. Please see your tax and legal advisers to determine how this information may apply to your own situation.

Back to the top/November 2004 Main Menu