The Alliance for Lifetime Income (ALI) released a study with a striking headline: Two-thirds of baby boomers at the highest aren’t financially prepared for retirement.
However, results from EBRI's 2024 Retirement Confidence Survey (RCS) found that “two-thirds of workers and three-quarters of retirees are very or somewhat confident that they will have enough money to live comfortably in retirement.”
Two retirement surveys, two different results?
Not so fast. The ALI survey measures retirement numbers, while EBRI asks how we feel about our retirement readiness, and there generally is a gap between the 2.
ALI focused on “peak boomers,” defined as those Americans who will turn 65 between 2024 and 2030, of which there are 30.4 million. According to the study, greater than half of those soon-to-retire retirees will rely totally on Social Security, which should replace about 40 percent of annual pre-retirement income.
ALI dug deeper to find out whether the collected wealth (the common retirement savings for top boomers is $225,000) would boost Social Security and last as long as 20 or more years in retirement. The answer is that two-thirds of top boomers “will be challenged to maintain their lifestyle in retirement.”
Conversely, the RCS asked people how confident they were that they could lead on a cushty life in retirement. While 68% are confident, only about half have checked out the numbers. If this were the case, the outcomes may very well be just like ALI's, as “a significant percentage of workers report that they have very little or no money for savings and investments.”
47 percent say the overall value of their savings and investments, excluding the worth of their primary residence, is lower than $100,000. (RCS relies on worker self-reporting; EBRI relies on Federal Reserve data.)
Ultimately, the 2 polls may very well be closer together than their respective headlines suggest. The concept that tens of millions of Americans face an uncertain retirement reality is the main target of a brand new book by economist and creator Teresa Ghilarducci. In Work, Retire, Repeat: The Uncertainty of Retirement within the New Economy, Ghilarducci digs into the numbers and finds a two-tier retirement system by which only “21% of Americans ages 62 to 70 come up with the money for to take care of their way of life “retired.” Of the 79%, “51% are retired but cannot maintain their standard of living before retirement.” And the remaining, 28%, are working and can’t afford to retire.”
You may be wondering why these people didn't save more or work longer.
Ghilarducci says, “Most retirees complain that they’re retiring sooner than planned because they were laid off, forced out of the workforce, or because their health or their spouse's health pushed them out of the workforce.”
I have spoken to many of these people and found that they were not spendthrifts, but were often unlucky and had to find lower paying jobs to meet their obligations.
For those facing an uncertain retirement, getting the most out of the Social Security system should be a priority. Although you can begin collecting benefits at age 62, doing so will permanently reduce your income for the rest of your life. This can also impact a non-working spouse who relies on your records for their benefits.
Instead, people should try to wait until full retirement age, which is 67 for anyone born after 1960, or until age 70, when pension maximization is reached.
This allows you to receive credits for later retirement, increasing benefits by 8% per year. Ghilarducci says these loans are “the perfect financial offer on the planet…in case you wait to assert them at age 62 to 70, your monthly lifetime pension increases by greater than 30%.”
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