Large numbers of persons in the Generation X category—a 10-year cohort that followed the baby boom; the oldest of Xers are now 48—are at risk of inadequate retirement income and the best thing they can do for themselves is to save through a retirement program, according to the Employee Benefit Research Institute.
Using the commonly cited standard of ability to maintain 80 percent of pre-retirement income as the standard for retirement security, a fifth of Xers are deemed to be at risk if they retire at age 65. But the study found a wide difference between those who would save nothing through retirement savings plan and those with 20 or more years of saving in such plans ahead of them. Among the former category, 30 percent are at risk but of the latter category, only 5 percent, it said.
Eligibility for a defined benefit retirement program—such as the CSRS and FERS civil service benefits—also can have a major positive impact, especially for those “fortunate enough to have at least 20 years of future eligibility in those programs.”
On the expense side, the study said that a wild card is the need for long term care such as home health care services or nursing home care. “Even though these events will not be experienced by all retired households, or experienced to the same extent, they can have catastrophic financial consequences for the future retirement income adequacy of the household,” it said. “Ignoring the impact of nursing home and home health care costs in retirement significantly exaggerates the likelihood of achieving retirement income adequacy.”
