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A day late & a dollar short: under-prepared Boomers facing less-than-shiny golden years.

Haven't saved enough (or anything) for retirement? Consider this a visit from the Ghost of Your Retirement Future. Yeah, sure, you probably planned on simply working "forever," out poor health will force a retirement anyway. You re left with little or no savings, out deeply in debt with a mortgage, medical bills and ever-growing credit care balances. And your only income is a paltry $1,230 check each month from Social Security.

I hope you have a plan B.


This scenario is becoming reality for far too many workers. Thirty percent of American workers have less than $1,000 saved for retirement, while 60 percent have less than $25,000 saved, according to the 2012 Retirement Confidence Survey conducted by the Employee Benefit Research Institute.

And Baby Boomers, who are approaching retirement at lightning speed, are not in great shape either-25 percent of those aged 46-64 have no retirement savings at all, according to Harris Interactive.

Generally, Social Security provides a safety net to prevent the elderly from falling into abject poverty. But it by no means provides the standard of living that higher-income people are accustomed to. Currently, for a retired worker, the average yearly income from Social Security is about $15,000, which compares to a full-time, minimum wage income of $15,080.

The parents of Baby Boomers often had employer pension plans to supplement their Social Security and personal savings. But pension plans are essentially gone with the wind. Even public employees are seeing changes to how pension plans--otherwise known as "defined benefit" plans--are administered and funded.

In Utah, new legislation puts much more of an emphasis on 401(k)s for public employees. As of July 1, 2011, new hires into the public system must choose between a defined contribution plan, in which 100 percent of the employer contribution goes into a 401(k), or a hybrid plan that combines a traditional defined benefit pension with a 401(k).

"The vast majority of public employees have relied on the pension, and now we're seeing that shift, where they need to get more involved," says Joel Sheppard, director of education and marketing for Utah Retirement Systems (URS), the organization that administers retirement benefit plans for 180,000 current and retired public workers in Utah.

Pensions are gone, people want to retire earlier and they are living longer, and Social Security is kicking in later. "All of these things are adding pressure incrementally to investors and workers trying to save for retirement," says Brad Thurber, a financial consultant with D.A. Davidson & Co.


For many, saving for retirement involves a 401(k) plan offered by an employer. According to the Retirement Confidence Survey, 74 percent of workers are offered a retirement savings plan at work. Of those, 81 percent actually contribute to the plan.

If your employer offers a 401(k) match and you don't take advantage of it, you're simply leaving that "free" money on the table.

At Nelson Laboratories in Salt Lake, the 401(k) savings plan is particularly generous. The company will match up to 4 percent of an employee's salary and there is no vesting period. Even so, only 64 percent of its employees participate in the plan.

"I have a rather young population," says Tera Sunder, chief people officer for Nelson Labs. The median age of employees at Nelson Labs is 35, and Sunder says many are just not thinking about a retirement that is at least three decades in the future. Instead, they are concerned with making student loan payments or buying their first home."

"People are trying to do the right thing. But the economy has made it hard for people to stay on their course," she says.

Nevertheless, the company tries to educate its employees about the importance of retirement planning. Once a quarter, the company's 401(k) vendor comes to give group presentations, and there are also individual time slots available for financial advice and planning. The company has also offered seminars on budgeting and financial goal setting.

"You can't just have the 401(k)," says Sunder. "You have to talk about why you have it and give people an opportunity to learn more about it."

Utah Retirement Systems is also engaged in a tremendous educational effort. But while its pre-retirement seminars, aimed at those nearing retirement, are usually filled to capacity, the personal planning seminars for younger employees are not as well attended.


"People just aren't taking retirement seriously--young people especially. People are racking up debt and not saving," says Sheppard.

Retirement may seem like an unimaginably distant event for someone in their 20s, but financial advisors say that is the best time to start saving.

"A little bit of money, for someone just starting out in their career, can actually go a long way, and arguably that's the critical time because that small amount of money compounding and growing for you is really what's going to matter," says Ryan Ashcraft, education and marketing manager for URS.


So what is the right amount of money to save for retirement? That depends.

"Often people just choose a number out of the air, but there's no real analysis that went into that number--it just sounds good," says Thurber. A million sounds like a good, hefty amount, but will it last through a long retirement and provide the expected annual income?

"Depending on their income levels and their debt levels and how early they want to retire--all of those factors play a huge role in determining what that nest egg number really needs to be," says Thurber.

Overall, he says, there is a very big gap between what people think they need and what they actually need.

First of all, you need to decide when you want to retire. "The earlier that you're looking to retire, the more money you're going to need," Thurber says.

In general, for people who are relatively debt free, the rule of thumb is to save enough to replace 80 percent of their annual earned income. But Thurber points out this is just a guideline--some want to spend more on travel and leisure during their Golden Years, while others plan on a quiet, frugal retirement.

"If you need to generate $80,000 a year, and that's 4 percent of your nest egg, then you need $2 million when you retire," says Thurber. "To get that $2 million, then we determine how many years to retirement, how much do we need to put away, and then set an annual savings goal."

Healthcare is another major factor to consider when creating a retirement strategy.

"There's a huge difference between retiring at age 62 and retiring at age 65 when you're eligible for Medicare, because of the health insurance premiums," says Thurber. If you want to take an early retirement, you need to add several years of insurance premiums into your nest egg total.

Building a nest egg is one side of the retirement coin--the other is eliminating debt. Becoming debt free is "equally if not more important that having a nest egg," says Thurber.

"For those that are nearing retirement, if they have some money saved and are eligible for Social Security, that is a much easier row to hoe if they don't have any debt. The people that are really in trouble are those that still have 25 years on a mortgage, they don't have a lot of money saved for retirement and they're trying to quit working."


"People need to not be afraid of the numbers," says Sunder. Ignorance is not bliss. In fact, she says, a basic understanding of retirement planning helps workers feel empowered--even if they have a long way to go.

Thurber agrees. "As soon as people go through the process of running even a simple retirement calculation for themselves, the amount of money that they save goes up, the confidence that they have in their retirement goes up--there's a lot of benefits that come from knowing, 'OK, here's where I'm at, and here's what I need to do to get where I'm going,'" he says.

AARP offers a simple retirement calculator on its website,



"The earlier people start planning, the better off they are," says Brad Thurber, a financial consultant with D.A. Davidson & Co. He suggests trying to save 6-10 percent of your income per year for 30 years in order to have enough set aside at retirement.

But what if that just hasn't happened? Thurber has several tips for those who need to play catch-up:

401(k) Strategy

Workers over the age of 50 are allowed to contribute additional tax-deferred money into their 401(k). The maximum annual contribution is now $17,000, but those over the age of 50 can add an extra $5,500. "Each person could realistically contribute $22,500 into their 401(k) pre-tax every year," says Thurber. And if the company offers a match, then the total is even more.

Enter the Workforce

Thurber says many Boomers with a non-working spouse are realizing that their spouse may need to go to work for the next 10-15 years. Why? This would enable the spouse to start funneling money into the 401(k)--potentially an additional $22,500 each year.

There are also Social Security implications. Non-working spouses are eligible for 50 percent of the working spouse's Social Security retirement benefit. However, if they can amass 10 years of employment, they would be eligible for their own benefit or 50 percent of their spouse's benefit--whichever is greater.

Work Longer

The easiest way to catch up is to work longer, says Thurber. "That has a compounding effect. One, an extra year worked is a year they don't have to save for: and two, it gives them another year of saving and investing for retirement."

Or, a Boomer could go ahead and take retirement, then work part-time for a few years to generate some extra income.


By Heather Stewart

Illustrations by David Habben
COPYRIGHT 2012 Utah Business Publishers LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2012 Gale, Cengage Learning. All rights reserved.

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Comment:A day late & a dollar short: under-prepared Boomers facing less-than-shiny golden years.
Author:Stewart, Heather
Publication:Utah Business
Date:Aug 1, 2012
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