The latter half of the baby boom generation has now started retiring in earnest but they overall are looking less financially secure for their retirement than their older colleagues in that generation–and those to follow are looking even more insecure–a study has said.
A report by the Urban Institute notes that using 1946-1965 as the birth years for the baby boomers, those in the second half, born in 1956-1965, hit age 62 last year–a commonly cited benchmark for retirement because that is about the average age of retirement and the first age Social Security benefits typically can be drawn.
The study examined the likelihood of being able to have 75 percent of pre-retirement income as retirement income. It said that while 32 percent of early boomers are–or will be–unable to meet that threshold at age 70, that will be the case for 36 percent of late boomers and 38 percent of Gen Xers, born 1966-1975. That in turn means they are more likely to face a reduced standard of living in retirement.
Reasons for the difference include that early boomers are more likely to have employer sponsored traditional defined benefit plans–in the federal government context, they are more likely to be enrolled in the CSRS system, whose defined benefit is about twice that of the FERS system, under which more late boomers are covered. FERS also includes Social Security but to equalize the total benefits, a FERS employee must build up a substantial TSP account.
In addition, “Growing health care spending burdens suggest that late boomers and Gen Xers may need to have at least 80 percent of their preretirement income to achieve the same living standard as their predecessors.”