According the Center for Retirement Research at Boston College, about 35% of the Early Boomers (those born between 1948 and 1954) will not have an adequate retirement income. This share increases to 44% for the Late Boomers (those born between 1955 and 1964), and then rises to 48% for the Generation Xers (those born between 1965 and 1974). These figures get even worse as we consider the rising cost of health care. This is why long term preparation for retirement is so important.
Three reasons why Baby Boomers will need to work longer
- Increased Longevity requires more money in the long run.
- Social Security is forecasted to decrease in the future
- Current low interest rates prevent people from living on their retirement nest egg
Working longer decreases the risk of running out of money in retirement by:
- Allowing social security benefits to increase
- Allowing 401(k) to build up
- Decreasing retirement period, thus decreasing the amount of funds need during retirement
The study by the National Retirement Risk Index (NRRI) shows that “over 85 percent of households would be prepared to retire by age 70. Thus, many individuals will need to work longer than their parents did, but they will still be able to enjoy a reasonable period of retirement, especially as health and longevity continue to improve.”