A Social Security cost-of-living adjustment could have a small but positive impact on retirement planning.
June 10--Just as they filled nurseries in the late 1940s and 1950s, the schools in the 1960s and the workforce in the 1970s, the 76 million members of the baby boom generation are now reaching retirement age.
Accounting for nearly one-fourth of the U.S. population, their impact on the economy, government policy and culture is expected to be every bit as profound in their golden years as it has been since their birth.
Baby boomers are Americans born between the period of 1946 and 1964. The oldest of those, reaching the age of 66 this year, are likely contemplating retirement or have already removed themselves from full-time work.
As boomers hang up their toolbelts and clean out their desks -- as many as 10,000 a day qualify for Social Security payments -- reports are surfacing in media of the poor job many of them have done in preparing for what faces them.
According to an article published on The American Dream, a website of social commentary, as many as 36 percent of those in the baby boomer generation have not contributed to a retirement program of any kind. Among those who did, many relied on 401(k)s and investment portfolios that have been seriously compromised by collapsing markets.
"They may have not saved as much for retirement as they needed," said Kenneth Siebenmorgen, a financial adviser with Ameriprise Financial in Fort Smith.
Compounding efforts to build security has been a decade of the worst performance in history of financial markets, impacting 401(k)s and other securities-based investments. "They've not grown like previous decades. That's just the reality," Siebenmorgen said.
The Employment Benefit Research Institute reports 35 percent of those of retirement age are almost totally dependent on Social Security benefits for income. Only about half the remaining 65 percent have retirement savings of $50,000 or more.
The 2010 MetLife Annual Survey of Employee Benefit Trends indicated 62 percent of the younger members of the baby boom generation and 60 percent of the older members felt they were behind schedule in retirement preparedness. The survey also indicated 16 percent of boomers reported they had not started retirement planning and 20 percent said they had no savings goal at all. The MetLife study involved interviews with 1,508 business decision-makers and 1,412 fulltime employees over age 21.
Reasons for not acting were also explored in the survey. Thirty-four percent of older boomers said they did not understand the process while 39 percent said they did not have money to invest in their future.
Brad Lewis, a financial adviser with United Financial Advisors in Van Buren, said clients who come to him for help are usually those "that have done some thinking and preparation, but not nearly enough" in planning retirement.
"Many of them wish they would have set aside more, started earlier," he said.
When asked about their prospects, he said, "I have to be honest with them. I can't sugarcoat it." That honesty involves an analysis of their income, how much they will have in retirement and what their expenses will be.
"The numbers don't lie," he said. "I tell them this is the shortfall and explain they will have to change their expectations. Maybe they will have to work a little longer or find a way to put more money aside."
Siebenmorgen said while many boomers may have done well in preparing for retirement, circumstances sometimes intervene. He said typically half those retiring do not retire by choice. Instead, conditions such as disability, death of a relative, downsizing or a plant closing cause them to end their career earlier than planned.
The disruption, Siebenmorgen said, interferes with plans to continue contributions to their nest eggs and lengthens the amount of time they will spend in retirement and relying on what they have accumulated.
"Baby boomers generally have higher income goals in retirement than their parents," said Siebenmorgen. "They want to travel, see their grandkids, explore things and places they have read about. Their parents were more satisfied with staying home, and involving themselves in fishing and playing golf on a local course."
In some cases, boomers also delayed having children, which leaves them approaching retirement as their offspring are completing college.
Lewis said the No. 1 error he encounters in retirement planning is procrastination.
"They may think about it when they turn 50," Lewis said. "They don't call me until they are 55, and they want to retire at 65. It's not that they hadn't thought about it; they just did not do something about it."
Siebenmorgen also says many of his clients don't address retirement concerns until they reach their 50s.
"They realize it is not too far away and get more serious about being able to retire," he said. He said those who find themselves on the short end of planning late in their career must face difficult decisions: "Do we downsize our house, push off retirement, work part-time during retirement, or try to live on less?"
Common misconceptions arise as potential retirees discuss their plans.
"Most individuals underestimate what they will need or what they will want to live on in retirement," said Siebenmorgen. "There are costs for basic needs that will continue to increase even when they retire -- gas, food, taxes, insurance."
Lewis said some among his clients are surprised at how much they will have to supplement what Social Security provides in retirement.
(c)2012 Times Record (Fort Smith, Ark.)
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