Despite good intentions, baby boomers' vision of their retirement lifestyle appears to be on a collision course with their financial preparedness.
According to a new survey conducted by the National Center for Women and Retirement Research (NCWRR), members of the generation born between 1946 and 1964 plan to live more actively in retirement than their parents and view the post-65 period of life in terms of opportunity, not exile.However, most of them may not be able to finance that dream.
"The major question facing this generation is a simple economic one," said Christopher L. Hayes, the center's executive director. "Are they going to be able to afford the retirement they envision? The answer, despite boomers' overall optimism, is a resounding no."
The statistics paint a troubling picture: Fifty-eight percent of baby boomers say they have no idea how much savings they will need for retirement; 46 percent tap into savings and investments now to meet expenses; one-fifth have less than $10,000 and two-thirds less than $50,000 in their 401 plans; and only 21 percent have established a nest egg goal.
"The data suggest a serious discrepancy between baby boomers' aspiration for an action-packed retirement experience and the reality of the lifestyle they will actually be able to afford given their present level of knowledge and planning," said Hayes.
However, he said, the survey "also implies that the boomers' long-observed denial regarding retirement planning is beginning to diminish as they begin to acknowledge that the time has come to put their money where their mouths are."
Seventy percent of baby boomers say they are worried about their financial future, and three-quarters regret not planning for retirement sooner, according to the NCWRR survey of more than 1,100 boomers with average household incomes of $56,000.
Despite their lack of financial preparation, nearly half of the sample - 48 percent - believed they would retire before 65. An equal percentage anticipated some type of paid employment after retiring from their primary jobs.
The center, based at Long Island University's Southampton College in New York, conducted the research for the investment company Scudder, Stevens & Clark.
A separate report issued by the Employee Benefit Research Institute (EBRI) in Washington, D.C., found that the continuing trend toward early retirement, combined with increased life expectancy and existing levels of personal savings, threatens to leave many retirees disappointed.
"With the age of full benefits under the 1983 Social Security amendments on the way up from 65 to 67, workers will face a greater challenge if they wish to enjoy a comfortable early retirement," said EBRI president Dallas Salisbury. "Those taking early retirement will get significantly lower Social Security benefits at age 62 than they do today," he added.
While public policy encourages a long work life, early retirement is more common today than in the past, especially among males age 55 to 64, the EBRI study found.
Still a third report suggests that whether they like it or not, paid employment will be in the future of many baby boomers well past the traditional retirement age of 65.
"Some who reach age 65 will continue to require outside income and will be unable to retire. Many others will not want to retire and will seek flexible work options," according to the Workforce 2020 report by the Hudson Institute, a conservative think tank.
"As average life expectancies extend past 80 years of age, even many of the well-heeled will conclude that 20 years on golf courses and cruise ships do not present enough of a challenge," the Workforce 2020 report concluded.
Whether they work by necessity or choice, many will have to learn new jobs. "Developing secondary employment skills will be critical for a generation that has been slow to accumulate savings in their peak earnings years," said Scudder's managing director, Dudley Ladd.
The NCWRR survey found that almost all boomers - 98 percent - describe retirement as offering new opportunities, leisure or freedom. Nearly half - 49 percent - said they were not troubled about growing old, and 12 percent said they looked forward to it.
Typically, boomers imagine an active retirement. Thirty-eight percent plan to travel, 27 percent say they will pursue hobbies, 24 percent hope to spend time with family and 10 percent said they look forward to volunteer work or education, the NCWRR survey found.
To help boomers and other future retirees assess their financial needs, Scudder has created a new, easy-to-use sliding chart that lets investors project their future retirement savings based on monthly investing at various rates of return. The retirement calculator also helps to determine the growth of any existing nest egg.
The retirement calculator is available free by calling 1-800-SCUDDER, extension 3220.