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Are you ready for retirement?
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What's the amount of money that younger workers should put aside to guarantee their retirement security?

The Center for Retirement Research suggests they should consistently set aside 6 percent of their income (assuming a 3 percent additional match from the employer) for a total of 9 percent. If the money is invested prudently and not tapped for other purposes during their working years, this should provide adequate income.

But other estimates run higher. Christine Fahlund, a certified financial planner at T. Rowe Price, says workers should save 15 percent of their incomes to ensure a prosperous retirement. She figures this would result in enough assets to replace just 50 percent of pre-retirement income.

Why change is needed: The consequences
The study cites several reasons for the dramatic change in our nation's "retirement income landscape." For starters, Social Security benefits will be delayed for many boomers, as the retirement age for full benefits rises from age 65 to 67. Other factors that spell doom: We live longer; we don't have traditional pension plans to fall back on; and bond yields and stock market returns aren't expected to produce a lot of income for retirees.

Also, we stink at saving outside our retirement plans, and we're not even that great at saving within our defined contribution plans. Fed Chairman Ben Bernanke said in a speech that workers don't pay enough attention to their savings and investment decisions. "Notably, despite the tax advantages of 401(k) contributions and, in some cases, a generous employer match, one-quarter of workers eligible for 401(k) plans do not participate," he says.

Here's the retirement study's finding: "In theory, 401(k) plans could provide adequate retirement income, but individuals make mistakes at every step along the way, and the median balance for household heads approaching retirement is only $60,000. ... Households fail to participate (in retirement plans), fail to save enough, invest too conservatively, or concentrate excessively on employer stock, and fail to roll over their plan balances on job change."

Not surprisingly, the study discovered that those making low incomes are at higher risk of not having enough in retirement, and may not even be able to afford the basic necessities, while those in the highest income group (not all that high, with a median income of $100,000) may just have to alter their lifestyles in retirement.

Tell your sons and daughters to start saving for retirement at the same time they're paying off student loans. And increase your own savings if you possibly can.

Here's the bottom line: We can choose to spend less and save more now. Or we can spend less later because we won't be able to afford to do otherwise.

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning.

If you have a comment or suggestion about this column, write to Boomer Bucks.'s corrections policy -- Posted: June 14, 2006
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