Gen X and Late Boomers Won’t be Ready to Retire
Financial planners suggest that you replace at least 70% of your income to be secure to retire. In an article by Forbes Gen X and late baby boomers aren’t on track to even have the bare minimum acquired for retirement. As a comparison “Depression babies, War babies and early boomers were on track to replace, respectively, 86%, 99% and 82% of their pre-retirement income.”
Why can’t the same be said for more recent generations then?
Two general reasons Forbes sites are employer-provided retirement benefits and the increase in debt.
Starting with employer-provided retirement benefits there are two general forms most companies use:
- “Defined-benefit” accounts (pensions) – they are a lifetime payout based on a formula centered around how long you have been with the company
- “Defined-contribution” plan (401(k)) – this offers no guarantee on how much money will eventually be paid out
The recent shift of companies only providing 401(k) options to employees it because it’s typically cheaper for them.
Moving on to the increase in debt we can typically base that on the increase in the cost of education and the easy access to credit. “People enter the labor market now…with a higher amount of debt” than in previous generations.
A Solution
Forbes goes on to suggest that we can’t solely look to make changes to retirement but the need to look at ones financial picture as a whole. “We need to find ways people can get help and advice on how to deal will with their financial wellbeing.”
Source: http://www.forbes.com/sites/laurashin/2013/05/28/why-gen-x-and-late-boomers-arent-on-track-for-retirement/