As the baby boomer generation reaches retirement age, many are facing the harsh reality of a less-than-cushy nest egg. Some put their kids through college at the expense of long-term savings. Others simply didn't save enough.
Indeed, the 78 million Americans born between 1946
and 1964 are on track to replace about 60 percent of their annual
incomes after retirement, according to the Fidelity Retirement Index.
The national survey by Boston-based mutual fund giant Fidelity Investments
also found that boomers set aside an average 4 percent of annual
income. So much for maintaining their current standards of living.
Despite the size of their bank accounts, however,
many boomers (the oldest of whom turn 60 this year) are unwilling
to put retirement plans on hold. With less money to live on and
life expectancies on the rise, seniors who failed to feather their
nest eggs may have to get creative to make ends meet, says Brent
Neiser, a certified financial planner.
|Retiring with a small nest egg?
Go to plan B
"I think a lot of people are just drifting into retirement
and haven't necessarily done things like calculate what their expenses
will be or taken a dry run on living with a more modest income stream,"
says Neiser, who also serves as director of collaborative programs
for the National Endowment for Financial Education, or NEFE, in
Denver. "If you've undersaved, you may still be able to (retire
on time), but you need to have a plan B in place."
That includes moonlighting. Some 67 percent of boomers
plan to work at least part time for extra income during retirement,
according to Fidelity spokeswoman Erika Soto.
"Part-time jobs, even if they don't offer benefits,
give you a little extra cash, and that can be just enough to give
you a comfortable margin to live on," says Clare Hushbeck,
an economist for AARP. "You can treat it almost as you would
a hobby, taking a job that teaches new skills you've always wanted
to master. It's also a great social outlet."
Retirees who leave their full-time jobs for consulting
gigs or part-time posts should set aside most, if not all, of their
income for retirement, notes the National Endowment for Financial
Education in its "Late
Savers Guidebook." By saving just $5,000 a year in an investment
with a 7 percent annual return, you could accumulate nearly $69,082
over 10 years.
Boost your budget
Spending less, of course, is another key component to making your
money last. But shoestring budgets can be tough to swallow for those
who haven't had to do without, says Hushbeck.
"Choosing to downscale your consumption is a
no-brainer, but it's not so easily done," she says. "Many
recommendations are of the spinach variety: They may be good for
you, but you're not going to like them."
Scrapping such things as high-speed Internet access,
cell phones, cable TV and high-priced social clubs, however, could
save you hundreds of dollars per month and prevent you from raiding
your nest-egg principal. Fewer dinners out will also help you control