Fastest Growing Segment In The U.S. Is The Age 65+ Group

The forecasted fastest-growing segment of the adult U.S. population by far from 2010 to 2020 will be the 65+ category, which is expected to grow by +36%.

This is due to the continuing maturation of the Baby Boom Generation, which swells the ranks of every age category it progressively hits.

Because of this large and growing 65+ population, much of the investment market is retirement driven, creating massive pools of retirement-directed capital in the financial markets.

Middle-Income Boomers's Survey Shows Lack of Retirement Security...

67% — Of middle-income boomers expect a much different retirement than their parents

60% — Of middle-income boomers "envy" the pensions of previous generations of retirees

55% — Of middle-income boomers have saved less $100,000

Unlike their parents, baby boomers retirement risks have shifted from employers and the government onto individuals with the switch to 401(k)s instead of corporate pension plans, cuts in employer-paid retiree health benefits and the uncertain future of Social Security and Medicare.

“Boomers may have to take more personal responsibility for their retirement financial security than was the case with their parents and plan for the risks that may jeopardize this security, like long-term care, inflation and outliving their money,” says Scott Perry, president of Bankers Life.

Retirement Likely to Mean a Lifestyle Downgrade

If you're a baby boomer, the odds are high you'll exhaust your retirement savings after 10 or 20 years of retirement, according to the latest Retirement Readiness Rating report released this week by the Employee Benefit Research Institute. 

Nearly 50% of older boomers -- those now aged 56 to 62 -- and some 44% of younger boomers -- aged 46 to 55 now -- are at risk of not having sufficient income to pay for basic retirement expenses and uninsured medical expenses, according to the study.

After factoring in health-care and long-term-care costs, the National Retirement Risk Index, or NRRI, produced by Boston College's Center for Retirement Research, finds that some 65% of American households are at risk of not having enough money to maintain their living standard in retirement, according to the NRRI.

The portion of Americans who plan to work past age 67 is higher than ever: a record 55% plan to work full- or part-time, up from 52% one year ago. And the percentage planning to work full-time past age 67 reached a new high of 28%, up from 19% one year ago. 

There was also a sharp rise in workers who said they will need to work longer than planned because of the economic crisis. Roughly 65% said they will have to work more than 1 year longer, compared to 54% in the previous study. And 27% said they will have to work more than 5 years longer, compared to 24% in the previous study.

Many Americans are already working longer, be it to maintain their standard of living, stay mentally engaged or for the health-care benefits. Americans aged 65 and older in the upper income quintile now get about 40% of their income from working.

Saving more and perhaps reducing your standard of living now might be the only way to be reasonably certain you'll enjoy any standard of living later on.

According to EBRI, if you want to be one of the 9 in 10 households that maintains its standard of living in retirement, younger boomers in the lowest income quartiles will have to save, on top of what they already save, an additional +25% of compensation every year, while those in the in the third income quintile will have to save an additional +15% per year. Those in the highest income quartile catch a break and don't have to save any more.

BOTTOM LINE: As a nation, we are far from retirement-ready, so millions will have to prepare to live frugally or save more.

Lots of Early boomers Will Go Bust in Retirement

Scores of pre-retirees simply don’t have enough money set aside; golden years could get tarnished fast.

By Hilary Johnson @ Investment News

July 13, 2010 

The oldest baby boomers, many of whom are expecting to retire soon, will likely not have enough money to carry them through their twilight years, according to a study released today by the Employee Benefit Research Institute.

Almost half, or 47.2%, of early boomers, born between 1948 and 1954 (and now age 56 to 62), were found not to have enough to pay for everyday expenses, as well as uninsured health care costs. Younger boomers, who are now age 46 to 55, are slightly better prepared, with 43.7% having insufficient resources. 

For Generation Xers (born between 1965 and 1974), the picture gets slightly worse again, with 44.5% of that group ill-prepared for retirement, according to the analysis by the non-profit, non-partisan EBRI, which based the study on a database of 24 million households that participate in 401(k) plans.

The retirement predicament for GenXers relates to an almost complete absence of any defined benefit plans for younger people, as well as the impact of inflation, especially on health care costs, explained Jack VanDerhei, EBRI research director.

Naturally, wealth makes a difference to retirement preparedness, too, with 70% of households in the lowest one-third of income at risk for running out of money. About 42% of the middle income group are at risk, according to EBRI. Not surprisingly, only 23% of the wealthiest households are at risk of running out of funds during their retirement.

These findings should spur “someone” to beef up retirement information and education, so that pre-retirees could really understand the challenge facing them. Mr. VanDerhei said.

“If people with significant savings gaps don’t start focusing on this until they turn 60, it’s virtually impossible to help them,” Mr. VanDerhei said.  

“But if I can get to someone at age 45, and convince them what they’re currently doing has virtually no chance of being successful, making up a deficit by saving an extra 3% to 5% isn’t difficult.” 

A web calculator that allows people to see how much they need might help the situation, Mr. VanDerhei suggested. “There should be some way to educate these individuals to do some sort of financial planning. They need to start with more information, and then they can go to their broker or whomever, to implement the plan.”

Baby Boomers in No Rush for Social Security Benefits

20% - Percentage of boomers who say they plan to apply for benefits as early as age 62.

25% - Approximate percentage of boomers who say they won’t apply for benefits until later than they initially thought they would.

69% - Percentage of boomers who have not changed their retirement plans.

6% - Percentage of boomers who say they’re applying for Social Security earlier than they thought.

Source: MetLife Mature Market Institute

Boomers In No Rush for Social Security Benefits

• 20% - Percentage of boomers who say they plan to apply for benefits as early as age 62.

• 25% - Approximate percentage of boomers who say they won’t apply for benefits until later than they initially thought they would.

• 69% - Percentage of boomers who have not changed their retirement plans.

• 6% - Percentage of boomers who say they’re applying for Social Security earlier than they thought.

Source: MetLife Mature Market Institute