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Here’s Why 43% Of Baby Boomers Could Wind Up Cash Strapped In Retirement

Here’s Why 43% of Baby Boomers Could Wind Up Cash-Strapped in Retirement

It’s a sad truth that 60% of baby boomers are more afraid of running out of money in retirement than they are of dying. But given how little today’s older workers have saved up for retirement, that fear isn’t unfounded.

In a recent Galllup poll, 43% of workers aged 50 to 64 say they intend to rely on Social Security as a significant source of retirement income. And while the program is scheduled to continue paying benefits at their current level for at least another 17 years (beyond which benefits could be cut), this attitude among boomers is cause for major concern.

Older couple looking at their bills, worried
IMAGE SOURCE: GETTY IMAGES.

Social Security is only designed to replace roughly 40% of the average worker’s pre-retirement income. And if you think you can live off just 40% of your former earnings, here’s a reality check: Healthcare alone will cost the average healthy 65-year-old couple $377,000 over the course of their retirement. Throw in housing, transportation, clothing, utilities, and meals, and retirees need to replace at least 70% to 80% of what they previously earned, unless they’re willing to cut every expense to the bone.

You can certainly count on Social Security as a form of supplemental retirement income. Those who save independently but factor retirement benefits into their budgets aren’t necessarily doing themselves a disservice — especially since, according to the latest projections, Social Security can keep up with scheduled benefits until 2034, which leaves Congress plenty of time to save the program from future cuts. But according to Gallup data, prior to the 2008 recession, older workers were more likely to cite their 401(k)s as a major source of retirement income. Nowadays, those same workers are relying more on Social Security and less on their own savings.

The good news is that baby boomers, especially younger ones, still have some time to ramp up their savings and salvage their long-term financial security. But those who continue to bank on Social Security as their primary source of retirement income will likely find themselves in the dreaded situation of being cash-strapped in their old age.

We’re not saving enough

The Economic Policy Institute reports that an estimated 41% of baby boomers have no money saved for retirement at all. But even those who are saving aren’t doing such a great job. The median savings amount among workers aged 56 to 61 is a measly $17,000, which is a drop in the bucket.

Meanwhile, this group’s average savings amount — which is skewed by extremely large figures and therefore doesn’t represent the typical nest egg — is $163,577. That may sound impressive, but it won’t get a typical senior very far. Let’s assume you’re a…

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