Pensions: Retirement crisis hits Boomers

EVERGLADES, FL - MAY 28: United States Senator...
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Beginning a disciplined plan to save for retirement can never start too soon and it is never too late. All Americans should recognize that only they are responsible for their own future.

“Florida has always counted on a big chunk of the baby boomers retiring down here and buying property over the next 20 years,” said Jack McCabe, a veteran Florida-basedreal estate analyst.“We’re not going to see this big influx of full-time senior citizen residents,” McCabe said. “Home builders may need to re-analyze what they see as demand over the next five to 10 years.”

Baby boomers are members of the first generation since the 1930s who will be worse off in their older years than their parents, says Teresa Ghilarducci, a retirement specialist and economics professor at the New School of Social Research in New York.

“According to our projections, it looks like most middle-class workers, not just low-income workers but most middle-class workers, will be living at or near the poverty level in their old age,” Ghilarducci said in an interview.

“This is the first time since the Great Depression we are looking at poverty rates increasing among the elderly.”

The Occupy Wall Street movement, and street protests staged by mostly younger people in major cities across the United States have grabbed the media spotlight in recent weeks.

But income inequality, bank bailouts and bad markets are issues resonating throughout the gated communities of traditional retirement havens like Florida as well.

Older Americans, a powerful voting bloc in the 2012 presidential election, are keenly aware of the economic downturn that has left growing numbers living in poverty.

Hopefully Future generations will see what happens when an entire generation does not save for retirement. Many baby boomers will never be able to fully retire.

Please comment or call to discuss how this affects you and what to do about it.

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Most Baby Boomers Will Work for Life

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There is no substitute for disciplined saving and strategies. A certain portion of your earnings should be deducted for retirement before you start spending. The question becomes’What if I live?’.

Many baby boomerswill continue to work after retirement. The decision to work during the traditional retirement years may be a choice or beyond our control. We may want to work in order to stay busy or we may need to work to replace savings lost in recent years.Retirement USA recently calculated a very scary number representing the gap between where retirement savings should be and how much Americans actually have. The total deficit was estimated to be $6.6 trillion dollars. In many cases, senior citizens will have no choice but to keep working past traditional retirement age.

This should be a wake up call for baby boomers as well as the generations that follow. If you do not save for your own retirement you may have to work for life.

Please comment or call to discuss how this affects you.

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Why Baby Boomers Can’t Retire

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There is no substitute for disciplined saving and a globally diversified investment portfolio. Many of us baby boomers believed we would live forever. It’s now payback time.

But what about the economic and cultural forces that have left baby boomers, myself included, financially unprepared for retirement?  Delay for us isn’t a choice but a financial imperative.The median balance for a household headed by a baby boomer age 60 to 62 with a 401(k) plan was just $149,400 – not even twice their median annual income of $87,700, according to Boston College’s Center for Retirement Research, which sponsors this blog.  Using the “4 percent rule,” a 401(k) would generate roughly $7,000 a year in retirement, the amount that retirees can safely withdraw annually from their 401(k) without depleting it.  That leaves a big hole that a Social Security check won’t fill for this relatively affluent population – people whose employers offer a 401(k).

Where did all that wealth created by the longest economic boom in U.S. history go?  We baby boomers are a privileged lot, and if we want something, we are accustomed to having it.  We lament the spending proclivities of our adult children, yet we wrote the book on mass consumption.  The average house size more than doubled during our generation – the McMansion is a baby boom creation – and we filled it with “stuff.”  We pioneered the use of multiple credit cards to feed our shopping habit and home equity loans to go on vacations or send our children to the best colleges.  I couldn’t imagine my parents doing that, and I’m sure most of my cohort couldn’t either.

Baby boomers are a generation of spenders and they are now paying the price. Hopefully the following generations will recognize this and develop good savings habits.

Please comment or call to discuss this important issue.

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Need additional tax deductions? Attract talent.

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Given the recent market volatility, many business owners, executive and professionals are looking for ways to build up their depleted retirement plan accounts.  The cash balance plan could provide this boost.  This depends on many factors, including income levels and stability.


Eighty-two percent of cash balance plans are in place at firms with fewer than 100 employees, the survey found. Many Baby Boomers who own small businesses have assets tied up in the business; now that they are looking toward retirement, their advisers are recommending asset protection and a qualified plan with the highest possible contribution levels, the report states.  “Small businesses are adopting these plans because they provide nice benefits for the employees at the same time create larger tax savings and retirement savings for the business owner,” Kravitz notes.   According to the Profit Sharing Council of America, the average employee gets 2.9% of pay when their employer sponsors a 401(k) profit sharing plan, “but when a small business or employer sponsors a cash balance plan the average contribution is 6% of pay, so these plans provide a much richer benefit for the employees while at the same time creates larger contributions and tax deferred savings for the owners,” Kravitz says.

There is an attractive alternative for employers to attract and retain top talent. Many studies suggest that employees are looking for a pension plan when seeking new employment.  The cash balance plan will be a win win for both the employee and the employer.

Please comment or contact us to discuss how this could impact your company.

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