Baby boomers are the next generation in line for retirement, and some are already there. In a perfect world, they'd be exiting the workforce with plenty of savings to cover their retirement expenses, but the truth isn't nearly as rosy. All generations of Americans are guilty of neglecting their retirement savings, and baby boomers are no exception. The problem is more serious for them, though, because they don't have as much time to make up for their failure to save early in life.

To finance their retirement, many are relying on a lot of support from the government. Nearly half of all boomers say that Social Security will be their primary source of money in retirement, according to a recent survey by American Advisors Group, a prominent reverse-mortgage lender. The government program will undoubtedly provide some money, but it won't stretch as far as many boomers hope it will.

Social Security card

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How much can baby boomers expect from Social Security?

Social Security was only designed to replace about 40% of pre-retirement income for average earners, according to the Social Security Administration (SSA), though it doesn't define what makes up "average earnings." Low-income households might find that it replaces more than 40% of their income, while it may cover less for high-income households. 

The average benefit check was $1,472 as of July 2019. That adds up to $17,664 per year. While that's a nice chunk of change, it doesn't come close to covering the average cost of retirement for most seniors. The typical household headed by someone 65 or older spends nearly $50,000 per year, according to Bureau of Labor Statistics data. Social Security won't even cover 40% of that. 

It also faces an uncertain future. The program's not going away, but its trust funds are slated to be depleted by 2035 unless the government makes changes to the program. Several ideas have been proposed, including cutting benefits, raising the Social Security tax rate, and reducing cost-of-living adjustments, but nothing has been done yet. It seems possible -- even likely -- that Social Security won't stretch as far in the future as it does today, which means retirees will have to increasingly rely on their woefully inadequate personal savings.

Social Security is just a start

Social Security plays an important role in your retirement, but if you make it your entire plan, you risk running out of money long before the end of your life. That undue stress could lead to health problems in your later years, and place a significant financial burden on your children. 

You need substantial personal savings to supplement Social Security; how much depends on how long you expect to live, the lifestyle you hope to have, and how big a benefit check you'll get. The only way to figure that out is to create a personalized retirement plan.

Start by subtracting your ideal retirement age from your estimated life expectancy. According to the SSA, 65-year-olds retiring today have a 1 in 3 chance of living past 90, and a 1 in 7 chance of living past 95, so figure high.

Next, total up your estimated annual retirement expenses and multiply that by the number of years of your retirement. You need to figure an additional 3% per year for inflation. A retirement calculator will do this part for you, and it will estimate your investment growth. Use a 5% to 6% annual rate of return to be conservative. 

Your calculator should tell you how much you need to save overall and per month to hit your goal. Subtract from these totals any income you expect from other sources, like a pension, a 401(k) match, or Social Security. Create a my Social Security account to estimate how much you can expect in benefits based on your work record. The amount you're left with after all these subtractions is how much you need to save on your own. 

Try to boost your retirement contributions accordingly. You might have to cut back on discretionary spending to make ends meet. If that's not an option, consider delaying your retirement to give yourself more time to save while reducing how much you need to save in total.

You could also delay Social Security benefits. You can start collecting as early as 62, but if you want the full amount you're entitled to, you must wait until your full retirement age (FRA), which is anywhere from 66 to 67 for most workers.

Starting early will reduce your benefits to account for the extra months you're receiving checks. You'll get only 70% of your scheduled benefit if you start at 62 and your FRA is 67. Those with an FRA of 66 will get 75% of their scheduled benefit if they start at 62.

But this process also works in reverse. You can delay benefits and your checks keep increasing every month until you hit the maximum at 70. This is 124% of your scheduled benefit per check if your FRA is 67, or 132% if your FRA is 66. Delaying Social Security benefits places a greater financial burden on you in the early years of your retirement because you'll have to pay for all of your expenses on your own. But once you start taking benefits, your checks will be larger and will cover more of your living expenses. 

Social Security is going to be there for baby boomers and generations afterward, but don't confuse this supplementary income with full financial support. You still need a solid retirement plan and a large amount of personal savings if you hope to retire comfortably.