 Are
you ready for retirement?
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We've heard the adage that to become physically fit,
we need to eat less and exercise more. The corollary for fiscal
fitness is to spend less and save more.
A new retirement-readiness study suggests that we
save more and retire later.
The new study
from the Center for Retirement Research at Boston College resulted
in the creation of the National Retirement Risk Index -- a nationally
representative index to serve as a lightning rod for "one of
the most compelling challenges facing the nation." In fact,
the study is more comprehensive in scope than others that strive
to measure Americans' preparation for retirement.
The biggest finding: 43 percent of households are
on course to retire with less than adequate income. The numbers
are worse for younger boomers and Generation Xers than for older
boomers -- those born between 1946 and 1954. That's partly because
older boomers have a greater likelihood of getting monthly incomes
from traditional pension plans. These "defined benefit"
plans are losing the popularity contest to "defined contribution"
plans such as 401(k), 457 and 403(b)
plans. The primary difference between the two types of plans: Employers
are responsible for funding the old-fashioned kind, while workers
must fund the others.
Most studies point to the same conclusion: Workers
are not doing enough to prepare for a smooth transition to retirement.
This study also paints the retirement picture in darker-than-golden
hues, but it offers hope.
Findings, assumptions, improvements
First, let's review the study itself. Then
we'll take a closer look at the findings and the assumptions
behind them. We'll figure out how we can make changes
for the better. And finally, look at the consequences
of failing to make those changes.
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"Retirements at Risk" study |
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