Don't Miss
Allianz Ad

Baby Boomers Have Only Half the Retirement Savings They Need

Baby Boomers Don’t Have Nearly Enough Saved for Retirement. Baby boomers are retiring in droves, or they’re close to it, and a majority don’t have nearly as much savings as they need.

In fact, they have less than half the assets they should, according to a survey from Legg Mason. Boomers — those born between 1946 and 1964 — expect they’ll need $658,000 set aside in their defined contribution (DC) retirement accounts by the time they retire. However, many have just $263,000 saved in employer-sponsored plans. Boomers ages 65-74 are slightly better off, with an average savings of $300,000. Nonetheless, it goes without saying, boomers are facing a sizable retirement savings shortfall.

Boomers’ asset allocation is more conservative overall, too, an investment management firm owned by Legg Mason found. A typical allocation for this age group is: 30% in cash, 24% in equities, 22% in fixed income, 4% in non-traditional assets, 8% in investment real estate, 2% in gold and other precious metals and 8% in other investments.

Boomers aren’t the only generation under-saved for retirement. Generation X workers — those born between 1965 and 1981 — have just $199,000 socked away in defined contribution plans, with a goal of $541,000 saved by retirement. Granted, they have more time to save than their Boomer counterparts, but it’s clear their savings efforts are falling short as well.

What’s more, the average middle-aged American couple has just $5,000 in retirement savings, according to the Federal Reserve’s 2013 Survey of Consumer Finances by economist Monique Morrissey of the Economic Policy Institute. And just a third of American workers who have access to an employer-sponsored retirement plan actually contribute to it.

If you’re a retirement plan sponsor, how can you help employees of all generations get closer to their savings goals? Consider offering a managed account advisory service in your plan’s investment lineup. Research shows that older, more tenured employees with larger account balances — like Boomers on the verge of retirement — can benefit from managed account services. Their finances are more complex, and they are more likely than younger employees to benefit from the advice and customization built into a managed account offering.

Moreover, a recent study from the Government Accountability Office (GAO) found managed account users typically have higher savings rates and better diversification — two issues that impacted the Boomers in the Legg Mason study.

Partnering with a knowledgeable retirement plan advisor may also help your workforce become better prepared for retirement. Someone who can help educate employees and guide them to make better, more informed investing decisions — and offer them someone to be accountable to in reaching their goals — can be a useful addition to your plan when it comes to improving participant outcomes.

And of course, don’t underestimate the impact of an effective education and communication program. When it comes to saving and investing for retirement, knowledge is power. The more you can help your employees understand and utilize the benefits available in their retirement plan, the more likely they are to engage with the plan and use it to help them prepare for a more financially secure retirement. Incorporating elements like basic financial literacy and investment education — even tying retirement planning into your financial wellness program if your company offers one — can help get workers on the right track to save for the future.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek
x

Check Also

TIAA Sales Practices

TIAA Sales Practices in Question – NY Times

TIAA may be in hot water, according to a recent New York Times article. The New York attorney general has subpoenaed documents and information related to dubious sales practices at the insurance and investment behemoth. There is also a similar ...