Please ensure Javascript is enabled for purposes of website accessibility

Only 66% of Baby Boomers Think They'll Have Enough Money in Retirement

By Maurie Backman - Feb 6, 2020 at 6:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're not one of them, here's what to do.

It's easy to think of retirement as a fairly inexpensive period of life, but actually, in some cases, your costs as a senior could very much mimic your expenses during your working years. This especially holds true if you don't enter retirement with a paid-off home, or experience major health issues as a senior that cause your medical spending to skyrocket.

It's for this reason that all workers are encouraged to save aggressively for their golden years -- to ensure that they have enough money to pay the bills once their time in the workforce concludes. Of course, Social Security does provide some income to seniors, but it's hardly enough to live on. At best, those benefits will replace about 40% of the typical earner's former wages, while most seniors need around twice that much money to maintain a decent standard of living.

Closeup of older man with serious expression

IMAGE SOURCE: GETTY IMAGES.

Unfortunately, roughly one-third of baby boomers aren't confident that they've saved enough for their golden years. In a new report by Fidelity, only 66% of boomers think they'll have enough money to maintain the retirement lifestyle they want. If you're not happy with your future financial prospects, there are a few key moves you can make to improve your outlook -- and help ensure that you're able to enjoy retirement to the fullest.

1. Take advantage of catch-up contributions

The good thing about being 50 or older is getting more leeway with your retirement plan contributions. Though younger workers can only contribute up to $6,000 to an IRA each year and up to $19,500 to a 401(k), these limits increase to $7,000 and $26,000, respectively, among workers 50 and over.

Now, imagine you're sitting on $300,000 in retirement savings by age 60 and want to retire in seven years. If you manage to max out your 401(k) during that time, you'll wind up with a balance of $568,000, assuming your investments generate a conservative 3% return. That's almost twice your starting point.

2. Extend your career

Working longer can improve your financial picture in retirement in two regards. First, it gives you a chance to boost your savings. Imagine that in the aforementioned scenario, you max out your 401(k) at today's rates for 10 years instead of just seven. All other things being equal, you'll increase your savings balance to $701,000.

Also, working longer could allow you to hold off on claiming Social Security. For each year you delay benefits past your full retirement age, they grow 8% -- for life.

3. Plan for part-time work

Working part-time in retirement is one of the smartest financial moves you can make. Not only is it a good way to generate extra income, but it can help you avoid spending money by giving you something to do with your time.

Furthermore, while working during retirement once meant signing up to manage a cash register or hand out food samples at a warehouse club, nowadays, your options are virtually endless thanks to the gig economy. You can teach an instrument you know, walk dogs, drive for a rideshare company, or find an online gig, like writing or editing. Or, you can start your own business, whether it's a flower shop, cafe, or tutoring service.

You deserve to enter your senior years with confidence in your ability to live the life you want. If you're not feeling financially ready, take the above steps to improve your outlook -- and avoid the stress so many retirees unfortunately face.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.