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Jim Lentini: The baby boomer retirement-readiness gap

Posted: March 1, 2011 1:55 a.m.
Updated: March 1, 2011 1:55 a.m.
 

As baby boomers reach age 65 this year and begin planning for retirement, they are concerned how the economy will affect their retirement income and what they have paid into Social Security during their working years.  

Projected deficits create cause for concern about the role that Social Security benefits will play in retirement planning.
Recent research on the topic of boomers and their readiness for retirement does not inspire great optimism.  

A 2010 study by the Center for Retirement Research at Boston College reported that the percentage of early boomers, born 1946-1954, and late boomers, born 1955-1964, households at risk of being financially unprepared for retirement are 48 percent and 41 percent respectively. 

In addition to unprepared Boomers, many working Americans don’t have an employer-sponsored retirement plan.  Roughly half of U.S. workers are without a retirement plan, either because they have opted out or simply because their employer doesn’t offer one.

With the economic problems causing employer cutbacks in existing plans among small businesses, and states now trying to reign in underfunded pension obligations for government employees, the percentage of at-risk workers could rise even higher. 
Action is needed to close the retirement readiness gap. A recent report stated the outlook for “adequacy,” whether people are saving enough for retirement, is improving in the wake of the Pension Protection Act of 2006. And the 112th Congress is expected to give a boost to 401(k) plans by passing the Lifetime Income Disclosure Act. Help may also come in the form of an automatic IRA, which proponents tout as a low-cost, 401(k)-like savings vehicle that will boost pension participation rates among workers, particularly those with low incomes.

A substantial increase in economic output will be required to boost employment, and along with that workers access to employer-sponsored plans. 

American workers must address the gap between government benefits, their employer-sponsored pensions, and their personal savings plans to ensure their retirement security. 

It’s imperative to discuss retirement planning with your financial adviser to close this gap and compensate for the short comings caused by current economic conditions.

While our federal and state legislators work on how to fix government deficits, it is our responsibility to rely on our own planning to close the gaps. Remember, “Make a plan, and work the plan.”

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.

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