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You Call This Retirement? Boomers Still Have Work to Do

As the idea of the American retiree evolves, not so many in this generation will hit the links

AARP Boomers at 50 Plus

En español | It is, by any measure, a fantastic sum: $21.7 trillion. No, that's not the latest GDP figure. That's how much money Americans now have set aside for their retirements, according to the Investment Company Institute. As the baby boom begins its long march out of the workforce (1 in 5 boomers, in fact, has already retired), Americans collectively are sitting on a jaw-dropping nest egg, dispersed in IRA accounts, employer-based 401(k) plans and pensions. The only problem: It's not nearly enough.

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The Evolution of the Retiree, How Boomers Changed Retirement

Boomers may face retirement reality that financial planning and saving may not have been enough. — Dan Saelinger; Prop Stylist: Dominique Baynes

For boomers at retirement, it's both the best and worst of times. The good news is that so many are still here: In 1900, the average life span was 47; a 65-year-old today can expect to live nearly two more decades. "It's the dream of history," says the psychologist and gerontologist Ken Dychtwald, whose research firm Age Wave dissects the massive "maturing market" of aging boomers. "For thousands of years we searched for fountains of youth."

Now we've found it — or at least a minor tributary of it. We've also found the bad news, which starts with money. It's always money, as my mother would tell me.

See also: Are you saving enough for retirement?

First, a little history. In 1967 a third of those 65 or older lived below the poverty line; in 2012 only about 9 percent did. This historic reversal, due largely to Social Security, Medicare and the widespread reliance on defined-benefit pensions, might not last much longer. "A greater percentage of the elderly will be poor or near poor than in the last 40 years," warns retirement expert Teresa Ghilarducci of New York's New School for Social Research.

Why? Simply put, the boomers are not saving nearly enough to offset the disappearance of pensions. A new Fidelity report says that 48 percent of boomers are not on track to be able to afford basic expenses in retirement, a figure echoed by the Employee Benefit Research Institute (EBRI), which declared in 2010 that 47 percent of the oldest boomers were at risk.

Maybe this shouldn't surprise anyone: A generation that swore never to get old turns out to be not stellar at retirement planning. Combine that with the rocky economy and the individualistic way most of us are now forced to save, and the results might be financially catastrophic.

The story has been oft told. What we think of today as the way almost everyone plans for retirement began as a small shift in the tax code in the late 1970s, designed to benefit a few high-earning corporate executives by letting them put aside a percentage of their salary on a tax-deferred basis. But soon the Reagan administration decided that companies could offer the benefit to all employees. The 401(k) was born.

The 401(k) was meant to supplement, not replace, traditional pensions. Instead, companies began dropping their pension programs. Today, they've all but disappeared from the private sector: Only 10 percent of boomer-age workers can expect income from defined-benefit programs. Less than two decades ago, more than half retired with pension income.

What killed the pension system? It was hope, but hope mixed with desperation and a bit of greed. The rise of the self-funded retirement dovetailed with the great bull market of the 20th century, when the S&P 500 increased by more than 1,000 percent in nearly 20 years. That growth allowed many to believe a contradiction: that stock market gains were inevitable, and their own investing prowess was responsible for them.

And no one fell for it harder than the boomers, a generation that always believed in the power of me. Their prime working years coincided with the stock market bonanza. Many journalists predicted they'd reap retirement riches. "Investing in a 401(k) is a pretty easy way to make a million bucks by the time you retire," Kiplinger's Erin Burt wrote in October 2007.

Next page: How boomers balance survival and fulfillment. »

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