Good old PBS. If you miss a great program, wait a while and it will probably be rerun. Here's one program you might want to check out next time it makes the rounds: The Boomer Century: 1946-2046. I found some sobering related statistics on its website:
- "Approximately 7,918 Americans turn 60 each day. That's about 330 every hour or more than four million a year in 2006. Within 20 years, the age profile of America will match that of Florida -- about one in five Americans will be older than 65." So far, so good, right? This one, admittedly, isn't so scary, unless you start imagining roads full of 90-year-old drivers talking to their cardiologists on cell phones.
- "Boomers who reach age 65 in 2011 can expect to live, on average, at least another 18 years. Four out of 10 boomers have less than $10,000 in retirement savings." Yikes! This is very, very scary -- even scarier than the BBC World News on PBS.
What it means
Let's work through an example, to see how dangerous a scenario this is. If you were born in the last year of the baby boom, 1964, you're 43 years old today. If you want to retire at age 62, you've got 19 years left. Let's say that you have $9,000 in retirement savings. Odds are, they're not earning market-matching returns, but let's be generous and assume they're in broad-market index funds and earn a compound annual average return of 10%. By age 62, that $9,000 will have grown to ... drum roll, please ... $55,000.
Is that enough to live on? Well, perhaps -- for a year or two, if you spend money at a typical rate.
Bad and good
It gets worse, though. That example was for the youngest possible boomer. Most are, obviously, older. If you're 55 with just $9,000 in retirement savings and you keep working until age 65, you'll end up with just $23,000 or so, if your moola grows at 10%.
But here's some good news: there are ways to end up with considerably more money. For example, don't just rest on your laurels of $9,000 or $90,000 in retirement savings. Whatever you've got socked away can serve you better if you keep adding to it. And remember that the most powerful dollars you can invest are your earliest ones, so don't procrastinate.
You can also aim for better returns than 10%, though of course neither the 10% nor the higher returns are guaranteed. Still, over long periods, stocks outperform bonds, and many carefully selected stocks and mutual funds have outperformed the stock market, too. Remember that $55,000 a 43-year-old would accumulate, gaining 10% yearly? Up the rate to 15% and she'll end up with $128,000. See what a difference a few percentage points can make?
And that's just from starting with an initial $9,000 investment. If she'd been adding to it over the years, the nest egg would have grown considerably larger -- perhaps two or three times larger, or more.
Here's one more nugget from the PBS statistics: "One-third of boomer households today have at least $100,000 in investable assets." So while some 40% of boomers are woefully behind schedule, more than 30% are in much better shape (though $100,000 isn't enough for most of us to retire on). If you have 15 years to retirement and $150,000 to invest, it can grow to more than $600,000 at 10%. At 12% annually, it would grow to more than $800,000. Earn a slightly higher rate of return, start with a little more than $150,000, or add to your investments along the way (as we all should), and you're looking at a million smackers.
Seeking bigger gains
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Longtime Fool contributor Selena Maranjian owns shares of Amazon.com. Amazon and Yahoo! are Stock Advisor recommendations. For more about Selena, view her bio and her profile. The Motley Fool is Fools writing for Fools.
