Learn From Boomer Mistakes

A MarketWatch article over the weekend pointed out some important facts about baby boomers being unprepared for retirement. The article claims baby boomers will need $658K in their retirement funds, but the average employer-sponsored defined-contribution plan for boomers only has $263K.

The article goes into specifics on asset allocation, but that’s not important. Let’s look at the numbers to put them in context. Let’s assume these retirees will live 20 years beyond age 65. A $658K nest egg, growing at a conservative 3% real return, will provide $44,228 per year, or $3686 per month. Add the average monthly Social Security benefit of $1,341, and you’re looking at living on about $5K a month. That’s just below the BLS average income for all households, which would give you a fairly comfortable retirement.

The boomers who only have $263K saved up will be living on $2,814 a month (including Social Security). Can you handle living on $2,800?

It’s an important lesson to the rest of us. I’ve never met a retiree who said, “You know what? I wish I’d spent more when I was younger because I have too much money now.”

The article warns that “the typical middle-aged American couple only has $5,000 saved for the future.”

Use this article to learn from the mistakes of others. Plan for your future now. If you’re not saving at least 10% of your income now, you’ll be the example used as a warning to others in the future.

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