6 Things Boomers Need to Know About Saving for Retirement

Several weeks back, I wrote a column entitled, “5 Things Millennials Need to Know About Saving for Retirement.” But what about those at the brink of retirement?

Retirement seems close — perhaps too close for the comfort of Boomers, some of whom have already begun cycling into retirement. In fact, the youngest element of this cohort (born in 1964) is now already 51, and it’s said that 10,000 Boomers roll into retirement every day.

That said, whether you’ve been saving or not, or not saving enough — here are six things Boomers need to know about saving for retirement.

1. Social Security won’t be as much as you think it will be.

When you were your kids’ age(s), you too were likely disdainful about the long-term prospects for Social Security (and hey, your kids weren’t around for the real funding crisis back in the early 1980s!). That said, you’re not only close enough to collecting; many of you are probably in the age group where when politicians talk about making changes, they’re careful to assure you that yours won’t be changed.

However, even if one assumes that the program remains largely unchanged from what it pays today, if you retire at full retirement age in 2015, your maximum benefit would be $2,663 a month, according to the Social Security Administration. Those who retire at age 62 (and many of today’s workers do, not realizing that waiting can translate into larger benefits) in 2015, your maximum benefit would be $2,025; and if you retire at age 70 in 2015, it would be $3,501.

Now those amounts are based on earnings at the maximum taxable amount for every year after age 21. In other words, that’s probably more than most of us would get. In fact, the average monthly Social Security retirement benefit for January 2015 was $1,328. Note that the maximum benefit depends on the age a worker chooses to retire, among other things — and that assumes that the current questions regarding Social Security’s longer-term financial viability are addressed, and/or that current benefit levels aren’t reduced.

2. Not everyone has a pension, and you probably don’t. And if you do, it probably isn’t a full pension.

Now, by “pension” I mean the traditional defined benefit (DB) pension plan, one that, in the private sector anyway, was largely employer funded. According to the nonpartisan Employee Benefit Research Institute (EBRI), in 2011, just 3% of all private-sector workers participated only in a DB plan, and 11% had both a defined contribution (DC) plan and a DB plan. So, only something like 14% of workers in the private sector still have a traditional pension plan (even then, it doesn’t mean there’s no reason for concern; see “3 Pervasive Retirement Industry Myths”).

That said, you’ve been in the workforce long enough (and during the right time) that you might actually have a pension, or at least a piece of one. Here’s the thing: People talk like the Millennials invented rapid job turnover, but the reality is that job tenure statistics have been relatively consistent going all the way back to the 1950s. What that means is that lots of workers who were “covered” by a pension plan didn’t work at those employers long enough to vest in that pension, or at least not long enough to vest fully. So, look back through your work history, check and see if those employers offered a pension. And you might want to check out thismissing pension tool from the Pension Benefit Guaranty Corporation (PBGC).

3. You won’t be able to work as long as you think.

I’m sure there are days when you would love nothing more than to be able to stay in bed (or at least not go to work). But industry surveys continue to suggest that not only do people expect to work longer, their retirement savings calculations seem to depend on it.

You hear people talk about 65 as the “normal” retirement age, even though it’s no longer that, even for Social Security benefits (aside from the reality that many still start collecting at age 62, unless you were born before 1943, your normal retirement age is 66 or older — you can check yours out here.)

Meanwhile, EBRI’s Retirement Confidence Survey (RCS) has consistently found that a large percentage of retirees leave the workforce earlier than planned — 49% of them in 2014, for example. Many who retire earlier than they had planned often do so for negative reasons, such as a health problem or disability (61%), though some state that they retired early because they could afford to do so (26%).

The bottom line: You probably shouldn’t count on being able to work as long as your finances may require. And that may require cutting back in the here-and-now in the interests of the there-and-then.

4. You could be missing out on ‘free’ money.

When you started working, if your employer offered a DC plan, you had to fill out a form in order to participate (you probably even had to wait a year), make investment choices, etc. These days a growing number of employers automatically enroll eligible workers in these plans, direct their savings into a default investment alternative, and even automatically increase that initial deferral rate each year. But even among those employers, most only automatically enroll new hires, not existing hires. And that could mean that even if you work for one of those employers, you might have been overlooked by these “auto” enrollment programs — and you might still need to go get one of those enrollment forms (or visit the plan’s website).

Your savings may well be matched by your employer (see “6 Things 401(k) Participants Need to Know”), so even if you’ve missed out on years of the opportunity to save and have those savings matched, there’s no time like the present to start — and start as aggressively as you can. After all, time is — literally — money.

5. You can use catch-up contributions to catch up.

Thanks to a provision in the tax code, individuals who are age 50 or older at the end of the calendar year can make annual catch-up contributions; up to $6,000 in 2015 and 2016 may be permitted by 401(k)s, 403(b)s, governmental 457s, and SARSEPs (you can do this with IRAs, as well, but the limits are much smaller). The bottom line: If you haven’t saved enough, these catch-up provisions can help. You can find out more here.

6. It’s not too late to start.

The reality is, without a sense of where you stand, what resources you have available, what your needs are and how long you have to prepare, it’s impossible to figure out the best way forward. But it starts with figuring out how much you’ll need. And for that, you might check out EBRI’s Ballpark E$timate — it’s free and easy to use. Then gather up those 401(k) statements, those IRA accounts, check for missing pension balances, and start saving!

- Nevin E. Adams, JD