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Many Baby Boomers Are Worried About Prospects for Retirement
When Elizabeth Buras' father retires four years from now after 30 years with a lift repair company, he'll receive monthly checks from his company's pension plan and Social Security. He'll also receive income from his company's 401(k) retirement plan2 and from his own investments.
But the way Buras sees it, when retirement rolls around for her husband, a 35-year-old manager at a Houston computer consulting company, there's just going to be the money they've been socking away in their 401(k)s every month and whatever other personal savings they've scraped together by then.
"A pension? I don't think so. Social Security? That's anybody's guess," says 32-year-old Buras, a stay-at-home mom. "I guess we're on our own."
She's probably right. For Americans born in 1935, the year Social Security began, the average life expectancy was just 63 years. By the time Buras and her husband were born, life expectancy had jumped to 70 years. A lot more people are making it to retirement age and beyond, and that's expensive both for the government and for employers who are anxious to cut costs.
?Unfortunately, a lot of future retirees haven't been paying attention - or they haven't started doing anything about it.
Even though members of the older generation could look forward to more help with retirement and had lower expectations about maintaining their standard of living after retirement, they also tended to be more concerned about staying out of debt and saving as much money as possible, says Michael Booker, a certified financial planner with Financial Synergies Asset Management in Houston.
? The Depression had a profound effect on that generation.
?"When it comes to the future, many people today have this bulletproof mentality," says Booker. "That's scary ."
?Financial planners say what today's workers need to understand - what they may know intellectually but what hasn't truly sunk in yet - is that they can't count on anyone but themselves to pay for their retirement.
The most obvious reason is that Social Security, which averages $745 a month for today's retirees and accounts for 42 percent of their income, may not be there for all of tomorrow's retirees.
A lot of people think that the 6.2 percent siphoned from their paychecks into Social Security coffers will be held for them and returned when they're ready to retire.
Not so.
Their taxes go to today's retirees. When it's time for today's workers to collect their own gold pocket watches, they'll have to rely on taxes paid by those still on the job.
Unfortunately, the first of the baby boomers are just a decade away from retirement, and the United States isn't churning out as many workers as it used to.
Although Social Security currently has a surplus because of the baby boomers' contributions, a crisis may be looming. According to the Social Security Administration, the number of Americans over 65 will double between 1990 and 2030, while the working-age population will grow only 25 percent.
That means there will be just two workers for every retiree, compared with 3.3 workers today. And many experts say that's optimistic.
Another major source of income for today's future retirees is also evaporating: Employers aren't taking as much responsibility for their employees' retirement as they used to.
More than twice as many employers offered pension plans in 1984 as in 1995, according to a survey by Watson Wyatt Worldwide, a pension consulting firm.
Smaller companies have dropped pension plans as costs have risen, says Chuck Bardwell at Watson Wyatt's Houston office, and even the larger companies' pension benefits aren't as rich as they used to be.
On the flip side, employees aren't as willing to stick around long enough to qualify for a satisfactory pension. They may fear getting laid off or they may just be restless.
"Life is moving so fast, with the modern couple spending so much of their time on work and raising their children, that they often don't look up until they're 50. By then it can be too late," says Booker.
It's a point that is not lost on Ken Buras.
"We're cognizant of what we need to be doing, but I don't think we've aggressively pursued it enough," admits Buras, who neither saves the maximum amount allowed in his 401(k) nor sets aside any money for other savings from his paycheck.
For the Burases, the big worry is saving enough money to put their 6-year-old child through college someday.
"We're more still looking 10 years ahead instead of 30 years ahead," says Elizabeth Buras. "I know that's not good, but that's the way we think."
White, a financial planner, says she has these simple words of advice for clients who don't take the long view: "If you don't send anything ahead, you won't have anything when you get there."
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