“Ready or not, here I come” is a phrase that many Baby Boomers shouted when they were kids, and hide-and-seek was a game that children played. Fifty plus years later, it’s ironic that the same phrase may be going through their heads. This time, it’s not a game. It’s about their retirement and the rest of their lives.
The facts about retirement readiness for Baby Boomers are sobering – paltry 401k account balances, modest or no pensions, and Social Security payments that replace about 40% of preretirement income for some, and far less for others. These situations not only have significant personal implications, but potentially greater societal ones. Within the next few years, we may find ourselves teetering on the brink of the next financial crisis or social crisis or both. The stark reality is that a large number of Baby Boomers simply are not going to be able to afford to retire, so they won’t. They will stay in their jobs or move into encore careers. Either way, many of the jobs they will occupy should go the next generations – Gen X and Gen Y – for our economy to sustain itself.
Since many Baby Boomers are not ready, what do we do? Working longer at the same job may seem like the obvious solution, but it’s not a panacea. It’s fraught with numerous shortcomings. Since there are no simple solutions, we must at least set a new direction. We must help older Baby Boomers come to grips with the fact that they are running out of time to save enough to retire on 80% of their pay. They can’t rely on the pensions the way their parents and grandparents did. They will be fortunate to get Social Security. Some may be lucky enough to receive an inheritance from their parents, but many will not be able to afford to do the same for their children. They may have a lot more to think about and a lot less to look forward to in retirement.
What Baby Boomers can look forward to is a longer life span and hopefully a healthier retirement than their predecessors. They can continue to demonstrate the spirit of ingenuity that made their generation great – to “figure it out”, just as they’ve done thousands of times before. It’s part of their ethos. Experience is the greater teacher. Baby Boomers can use the time and experience they’ve gained to share their learnings with others. It’s part of their responsibility. They must convince the future generations to think differently about saving for retirement and help them reorder their financial priorities, starting today rather than tomorrow.
Change is hard. Not changing could be worse. We must fundamentally change the way we think about saving for retirement. We must pull out of the downward spiral that we find ourselves in today, before it’s too late. Ready or not, tomorrow is coming.
I’ll talk more about retirement readiness and Gen Y in upcoming blog posts, so be sure to check back. In the interim, feel free to leave a comment below.