Boomers’ Retirement Reality Requires Careful Planning
Work longer or reduce your standard of living – or do some combination of the two. These are the hard choices facing most working boomers as they transition out of the workforce and into retirement.
The fact is, most boomer workers haven’t accumulated sufficient savings to retire full-time at age 65 and meet the goals that financial advisors commonly express for retirement income, according to a recent report from the Stanford Center on Longevity (SCL). This report analyzes boomers’ assets, debts, and the amounts they’re saving for retirement. Let’s take a look.
Retirement advisers often say that you need a retirement income equal to 70% to 80% of your preretirement, pretax pay in order to have a comfortable retirement. Behind this goal is an assumption that to maintain your standard of living in retirement, you need to replace the aftertax, spendable income that you earned before retirement. According to this conventional wisdom, you don’t need to have the same level of pretax income in retirement that you enjoyed while you were working because:
you won’t be paying FICA taxes (7.65% of earnings up to $132,900 in 2019),
your income taxes will be reduced,
your working expenses will be reduced or go away completely, and
you won’t be saving for retirement.
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