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Dave Carpenter

For boomers who don’t save and plan, a slow-burning retirement crisis awaits

By Dave Carpenter
Associated Press / December 28, 2010

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Through a combination of procrastination and bad timing, many baby boomers are facing a finance disaster just as they’re hoping to retire. Starting in January, more than 10,000 boomers a day will turn 65, a pattern that will continue for the next 19 years.

But a generation that made its mark in the tumultuous 1960s faces a crisis as it hits its mid-60s.

There are several reasons to be concerned: The traditional pension plan is disappearing; reliance on stocks in retirement plans is greater than ever, but the past decade has been a lost one for stocks; and many people banked on their homes as their retirement fund, but housing prices have crashed.

Some 51 percent of early boomer households, headed by those ages 55 to 64, face a retirement with lower living standards, according to a 2009 study by the Center for Retirement Research at Boston College.

The recession has helped improve the savings rate — it’s now back above 5 percent. Yet typical boomers are still woefully short on retirement savings. Signs of coming trouble are visible on several other fronts, too:

■ Mortgage debt. Nearly two in three people age 55 to 64 had a mortgage in 2007, with a median debt of $85,000.

■ Social Security. Nearly three of four people file to claim Social Security benefits as soon as they’re eligible at age 62. That locks them in at a much lower amount than they would get if they waited.

■ Medical costs. Health care expenses are soaring, and the availability of retiree benefits is declining.

■ Employment. Boomers both need and want to work longer than previous generations. But unemployment is near 10 percent, and many have lost their jobs.

Add this all up, and there’s a “slow-burning’’ retirement crisis for boomers, says Anthony Webb, a research economist at the Center for Retirement Research.

“If you have a crisis where the adverse consequences are immediately clear, then people understand that they have to do something,’’ Webb says. “When the consequences will be felt 20 or 30 years in the future, the temptation is that we kick the can down the road.’’

As a result, he believes many won’t change their behavior.

For less affluent boomers, it won’t take that long to feel the pain of poor planning. Concerns about financial trouble will hang over many of those 65th birthday celebrations in 2011.

Many seem to view their plight through rose-colored glasses, though.

An AARP survey last month of boomers turning 65 next year found that they worry no more about money than they did at age 60 — before the recession or the collapse of home prices.

But in an acknowledgement of reality, 40 percent said they plan to work “until I drop.’’

Dave Carpenter writes for the Associated Press.