The average baby boomer’s savings will last only seven years in retirement, a new study found, unless they curb their spending during their golden years.
Boomers on average have $920,400 saved for retirement, the Charles Schwab survey of 2,000 Americans aged 55 to 75 with at least $100,000 in investable assets found. But they expect to spend $135,100 per year to sustain their ideal lifestyle in retirement, meaning their savings would run out after seven years.
“Boomers in this study have been saving for retirement and are confident, but for many there’s a potential gap between what they have saved and the retirement they’re envisioning,” said Rob Williams, vice president of financial planning of Charles Schwab. “The reality is that they may come up short.”
So how do they expect to stick with this vision? By working more and putting their needs first.
Working longer and working part-time to sustain dream retirement
Aspiring retirees expect to retire at age 66, the study found, seven year later than their peers who have been retired for at least five years. That implies they plan to work longer, which could help boost their savings and reduce how much they will eventually need in retirement.
“More years until retirement is better than nothing,” Williams said, “especially if you use this time to think how much money you need in case things don’t work out as planned.”
A third of those approaching retirees also plan to work part time in retirement, compared with just 2% of those who have already retired.
More than half of those affected financially by the coronavirus pandemic intend on developing a clear financial plan, and nearly 1 in 4 said they have started to save in an emergency fund.
“To ensure you don't outlive your money, it’s critical to have a full-blown financial plan in place that’s been tested against market downturns, healthy risks and other unexpected factors,” said Tony Zabiegala, chief operations officer at Strategic Wealth Partners, a financial firm.
Boomers plan to prioritize themselves over their children
Even as more young adults are living with their parents, baby boomers aren’t letting their children sway their retirement goals, according to the Schwab study.
About 2 in 3 baby boomers believe they would rather spend money in retirement than leave an inheritance for their children. Four in 10 believe their quality of life in retirement will be better than that of their children.
“The stresses of election, global warming and the pandemic make them a little bit more concerned about the long term future for their children,” Williams said, “who are also going through financial challenges with college education.”