Golden years losing luster for boomers
By Susan Tompor
Detroit Free Press
DETROIT — No matter how you run the numbers, many baby boomers are looking at a far less glamorous retirement than all those delightful TV ads might suggest.
Dreaming of tai chi classes on the beach? Kayaking in the Grand Canyon? Or maybe cruising off into the Caribbean sunset?
The reality is that at least half of all baby boomers — about 76 million people ages 40 to 58 — will be in a serious cash crunch when they stop working.
The first boomers turn 62 and are eligible to tap Social Security in 2008. Yet a recent New York University study found more than half of all households closing in on retirement won't be able to string together enough money — through pension checks, 401(k)s, other savings and Social Security — to cover 75 percent of what they're making now.
The 75-percent standard is a pretty basic goal for retirement planning. You might even feel you need more money to live. But ask yourself this: Could you live on half or less of what you're making today?
Faced with the choice of staying on the job, or living on a lot less money, many probably will keep working well into their 60s and 70s.
Some will choose to remain in their jobs. Others will go into semi-retirement, taking whatever part-time or contract work they can find to maintain their standard of living.
"What's true today is that the uncertainties surrounding retirement are far greater than they were for the previous generation," said Olivia Mitchell, professor of insurance and risk management at the Wharton School of the University of Pennsylvania.
"I think the baby boomers are going to redefine retirement _ and it's going to include work much more often than in the past."
Mitchell, 51, is a boomer and she plans to keep working as long as she can, too.
"I'm not going to retire," she said.
Boomers will get crunched on a bunch of fronts. They'll pay more for healthcare in retirement than their parents, they'll most likely get less money from Social Security, and many won't see a traditional pension check.
Companies are cutting back on traditional pensions, and they're getting stingier with healthcare coverage for retirees, too.
The boomer generation needs to get ready for "the largest do-it-yourself project this country has ever seen," said Andrew Tappe, senior vice president for Fidelity Brokerage Services in Boston.
And they're not ready yet.
"Clearly, boomers are not going to have enough money to meet basic expenses," said Steve Blakely, editor and communications director for the nonprofit Employee Benefits Research Institute in Washington, D.C.
One study suggests America's boomers face an income shortfall of at least $45 billion in 2030 alone when boomers will range from ages 66 to 84.
It hasn't helped matters that as many older boomers inched toward retirement, their 401(k) investments got smacked by one of the worst bear markets ever.
Many boomers say they'll need to keep working — or postpone retirement — because they'll still need to put their children through college. Or they don't work in jobs that have traditional pension plans. Or they don't want to give up spending money on the good life now.
Alan Hull, 51, says he's not looking to retire from his information technology job at Ford Motor Co. soon. He lost about $20,000 during the Internet bubble.
But the real reason he doesn't want to retire early is that he enjoys spending money.
He took his girlfriend to Tahiti four years ago. This year, they went to his time-share spot in Cancun, Mexico.
And Hull, who began working for Ford in 2001, enjoys buying his toys. He's spent several thousand dollars on a home entertainment system.
"I'm not looking to quit working anytime soon," Hull said.
Some retirement experts question whether boomers will be able to patch together enough money in retirement to cover the essentials.
One reason: Many boomers won't be able to depend on a traditional pension.
Fewer than half of the 47- to 64-year-olds have traditional defined pensions. Wolff says that 20 years ago, about two-thirds of retirees had a traditional defined pension plan.
Another reason for trouble: Social Security benefits have already been cut for younger boomers.
Today, the average wage earner can expect Social Security benefits to replace about 40 percent of their previous earnings.
But younger boomers should expect that Social Security might replace only 25 percent to 30 percent of their income in retirement, said Alicia Munnell, director of the Center for Retirement Research at Boston College.
It's not going to be a pretty picture.
"They're going to have to scramble to make ends meet," Munnell said.
