The baby-boomer generation is poised to blaze new frontiers in retirement as it has in other endeavors. Yet, in this case, many boomers are experiencing regret, frustration and resignation that the path their parents took is closed to them.
As a group, boomers aren’t well positioned for a leisurely or even comfortable retirement in the traditional sense — leaving the workforce by or before age 65 and living in relative high style off a combination of savings, pension and Social Security.
Many face the prospect of working further into their senior years if they are able, while accepting that their budgets for travel and recreation will be, at best, smaller than hoped. Some face the grim prospect of running out of money in their twilight years.
The decline of pensions, longer lifespans, higher debt and lower savings rates — combined with battered 401(k)s from two recessions in the past decade and the devastating impact on jobs and housing in the most recent downturn — have combined to radically alter the reality of retirement for boomers, the oldest of whom are now well into their 60s. Adding to the anxiety are concerns about the future of programs such as Social Security and Medicare.
“My retirement plan is that I have none anymore,” said John Taylor, 54, of Loveland.
Taylor lost his job as a handyman for a commercial real estate company three years ago, watched his house slip away in foreclosure and then cashed out what remained of his 401(k), about $23,000, for living expenses.
Even those who are better prepared and more fortunate are feeling the pressure from diminished investments and fallen home values.
“It’s not what your dream was, but you have to make it as positive as you can,” said Barbara Brito-Trujillo, 64, of Brighton.
Her husband, Les, 65, is planning to continue working several more years as a marketing director for a commercial builder while Brito-Trujillo works part time selling natural health remedies. The couple expects to sell the home where they raised three children and move into a townhome, and they will travel less than they had hoped, she said.
“We’re going to have to make adjustments to allow us to be comfortable without the anxiety,” she said.
There’s still time to save
If there’s a silver lining to this story, it’s that many boomers still have time to boost their savings, better manage their investments and make other adjustments — such as working longer and downsizing their living space — to improve their retirement prospects.
Consulting firm Mercer released results of a recent survey indicating that more people are increasing their retirement savings. Over the past year, 41 percent said they increased their 401(k) contribution rate, compared with 31 percent in 2010. They also expressed greater confidence in the investments and allocation of funds in their retirement savings.
An Allianz Life Insurance Co. of North America survey from June showed that boomers have become much more conservative with their money, moving away from stocks into more fixed-income investments. The survey found that 35 percent of boomers felt they were “totally unprepared” for retirement, and about half were worried they might outlive their savings.
As a rule of thumb, financial advisers say retirees need at least 70 percent of their working income to live comfortably in retirement, including Social Security, savings and other income.
How much savings that means for each individual and couple varies depending on income and other factors. A 64-year-old earning $50,000 a year and expecting to retire next year would need $300,000 on the conservative end, according to CNNMoney’s retirement calculator. The same person earning $100,000 would need in excess of $750,000. ()
The typical older boomer household had a net worth of $152,000 in 2004, excluding Social Security and defined benefit pensions, according to the National Bureau of Economic Research. The Dow Jones industrial average has risen about 6 percent since then and housing prices have declined.
“The market hasn’t built wealth like they expected,” said Charlie Farrell, author of “Your Money Ratios” and an investment adviser with Northstar Investment Advisors in Denver. “People are nowhere near the returns that were being projected back in the late 1990s.”
Farrell says retirees should aim to accumulate savings of 10 to 12 times their annual income when they retire — given that they may live up to 30 years past 65. They also should retire with as little debt as possible, he said.
“Things just keep eroding”
Many investors believed the stock market was back on the upswing until this year, but losses returned and the possibility of another recession grew. That’s prodding boomers to focus more than ever on their nest eggs.
“It’s really hard in this economy to see yourself staying retired or even semi-retired because the target just seems to keep changing,” said Marlene Groves of Elbert County, who is in her mid-50s. “You’re trying to protect your assets, grow your assets, but things just keep eroding.”
Groves retired from a career in business consulting when she was 38. She and her husband, who had sold a commercial kitchen-equipment manufacturing company, started a buffalo ranch on 400 acres northeast of Kiowa. That business has had its ups and downs, and Groves is considering whether she’ll have to go back to work full time or launch another venture.
“We’re concerned about it, not panicked about it. We’re smart people. We’ll plan and try to act proactively,” she said. “But in an uncontrollable scenario, where the economy goes down again . . . we may have to do something else.”
Susan Paquette, 64, of Milliken said she would like to retire now from her job as a financial analyst for a technology company but instead plans to work at least another two years. Having raised her own children as a single mother, and then two grandchildren, Paquette hasn’t been able to save much for retirement.
She was diagnosed with thyroid cancer in 2010, and though she’s recovering well, she doesn’t want to give up her company health care coverage. She’s worried she could be laid off in a workforce reduction.
“Between Social Security and my pension plan, I would be taking in about half of what I’m getting now in salary,” she said. “Knowing I’m not in a comfortable position to retire and worrying that I could be laid off, it doesn’t help a bit. It probably doesn’t help my health.”
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
