A new report says that most baby boomers have successfully stuffed enough pennies into the piggy banks – and dollars into the 401(k) plans – to retain their status as the most pampered generation in America, even in retirement.
Americans have put away $18.5 trillion for retirement in 401(k) contribution plans and defined benefit pension programs, according to the report published by the Investment Company Institute.
‘Pyramid’ of Retirement Funding
The ICI study said that although the sputtering economy has slowed recent gains, the average household still has $153,100 in retirement savings. That is up only 2 percent since 2005, but is 50 percent more than it was in 1995 ($105,400) and 173 percent more than in 1985 ($56,100).
According to the ICI press release: “Most households maintain their standard of living when they retire. In addition, analysis shows that, on average, more recent retirees have higher levels of resources to draw on in retirement than previous generations.”
The ICI study said that people are now using a five-tiered system “pyramid” to build their retirement nest. Homeownership, pensions, IRAs, and other assets supplement their Social Security benefits and carry them through retirement.
Social Security is still the foundation of the pyramid plan, but it has become an increasingly smaller portion for many retirees.
Those with the least amount of total retirement assets, less than $93,500, are counting on Social Security to provide 82 percent of the money they’ll have for retirement. Social Security accounts for 58 percent for those with $294,000 in retirement assets; 41 percent for those with up to $543,000; 28 percent for those with $994,000; and 14 percent for those with $2 million or more in retirement assets.
“Contrary to what we too often hear, the U.S. retirement system has successfully provided generations of Americans the resources they need in retirement,” ICI President and CEO Paul Schott Stevens said in the press release.
As Schott’s statement suggested, not all boomers believe life won’t change much when they retire. Some are still struggling to reach their goal of retiring by age 65 and for most of them, it’s not saving, it’s spending that is holding them back.
Spending Habits Hold Boomers Back
The National Center for Policy Analysis did a study comparing spending habits for workers 45-54 and 55-64 with spending habits for the same age groups 20 years ago, and results were not that encouraging.
Mortgage debt is the largest expense, as some boomers bought bigger and more expensive houses than they could afford. When the real estate market crashed, so did their finances.
Student loan debt, dating back to their days in college in the ’60s ‘‘70s, is another anchor tying boomers down. New York’s Federal Reserve Bank did an analysis recently that showed one-third of the nation’s $1 trillion student loan debt belongs to people 40 or older.
Other expenses weighing down boomers include health care costs and paying living expenses for adult children. Boomers are still picking up expenses like medical bills, home and car loans, and weekly spending money.
Still, overall the news is very good for the newly retired and soon-to-be-retired baby boomers.
Poverty among people age 65 and older dropped from 30 percent in 1966 to 9 percent in 2011, leaving a smaller percentage of seniors living in poverty today than the percentage of people 18-64 (14 percent) and 18 and younger (22 percent).