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New Study: America’s Retirement IQ is Low

Boomers Lack Knowledge & Are Undersaved for Retirement

A startling number of baby boomers don’t know how much money they need to live comfortably during retirement, and without a target in mind, have ended up saving very little. In fact, 1 in 4 baby boomers have less than $5k saved for retirement.

But the good news for boomers struggling to plan for their golden years is it’s easy to raise your retirement IQ. Start with the basics of estimating costs, get a balanced portfolio in place, and research financial products that offer a guaranteed stream of income no matter how long you live.

Although many Americans think they are financially savvy, new data shows how the group closest to retirement, baby boomers, struggles with retirement fundamentals and is not saving enough for their golden years. New data released by the Indexed Annuity Leadership Council shows that many baby boomers aren’t financially prepared for retirement – they have little saved, are consumed about lifetime income options, and don’t know how much money they need to live comfortably.

  • 60% of baby boomers think they need less than $1 million in retirement, when in reality at least a quarter of a million will be needed for health care costs alone
  • 1 in 4 boomers have less than $5,000 saved for retirement
  • Nearly half of boomers don’t know that there are financial products that deliver lifetime income
  • 2 out of 5 boomers think they will get more money from Social Security than the average monthly payment

Many baby boomers are banking on Social Security as a main stream of money for retirement. Yet, more than half of boomers cannot correctly guess the average monthly Social Security payment. In fact, many think the average monthly payment is $500 more than it actually is – a budget miscalculation that will leave them almost a quarter of a million dollars short over a 30-year retirement.

Social Security isn’t the only consistent paycheck available in retirement; Fixed Indexed Annuities (FIAs) can provide a steady, guaranteed lifetime income stream with minimum guaranteed interest credits. FIAs can serve as part of a balanced financial plan because they do not directly participate in any stock or equity investments and protect your principal from fluctuations in the market.

Budgeting troubles continue when boomers are asked what they would do with a large cash gift as retirement doesn’t come to mind for many.

  • 40% of boomers prioritize lifestyle purchases over retirement savings
  • 52% of boomers have debt to pay down before saving for retirement

“Struggling to estimate how much money will be needed during retirement or sifting through different financial products can feel like a big hurdle, especially for those close to retirement,” says Jim Poolman, executive director of the IALC. “The good news is it’s fairly easy to increase your retirement IQ.  Start with the basics of estimating retirement costs and getting a balanced portfolio in place.”

Ensuring your savings can fulfill your retirement expectations starts with calculating how much you’ll need for the entire length of retirement. You’ll need to take into account your lifestyle budget, Social Security benefits available to you and any lifetime income streams. Once you know how much you’ll need, you can evaluate your current savings plan and how the products in your portfolio are helping you achieve your retirement goals.

How will you pay for retirement? Find out how much you will need with IALC’s retirement calculators.

Data trends were compiled from the GfK’s KnowledgePanel, a nationally representative sample of 6,490 Americans between April and May of 2016 and Toluna’s online panel in August 2016, among n=510 adults (ages 18 and over).  Figures for age, sex and region income were weighted where necessary to bring them into line with their actual proportions in the census population