{"id":22647,"date":"2017-07-12T10:28:55","date_gmt":"2017-07-12T17:28:55","guid":{"rendered":"https:\/\/goldco.com\/?p=22142"},"modified":"2025-12-15T16:42:59","modified_gmt":"2025-12-16T00:42:59","slug":"baby-boomers-not-prepared-for-retirement-are-you","status":"publish","type":"post","link":"https:\/\/goldco.com\/baby-boomers-not-prepared-for-retirement-are-you\/","title":{"rendered":"Baby Boomers Not Prepared For Retirement: Are You?"},"content":{"rendered":"

A recent survey has shown that baby boomers have far less money saved up in their defined contribution plans<\/a><\/u><\/span><\/span> than they should. That survey found that baby boomers averaged around $263,000 in savings in their employee-sponsored plans (e.g. 401(k) plans), versus the $658,000 that they would need in those plans in order to retire safely. And while those ages 65 to 74 averaged around $300,000 in those plans, that\u2019s still well less than 50% of what they should have.<\/p>\n

For someone retiring at age 65, it would take about $1,800 per year in contributions for 40 years at a 6% annual rate of return to get to $300,000, or $3,600 per year for 30 years. That\u2019s $5-10 a day in contributions to a retirement account at a very conservative growth rate. Given the actual growth rates over the past several decades, this means that baby boomers either have very poor saving habits or they were significantly affected by the financial crisis, or perhaps a little bit of both. The 2008 crisis hurt many retirement plans, forcing those close to retirement to minimize retirement contributions or borrow from retirement accounts in order to satisfy current expenses, as well as cutting down on the number of good asset options.<\/p>\n

That\u2019s also reflected in baby boomers\u2019 asset allocation, which the survey showed were 30% hold cash. Cash is one of the worst assets possible. Holding a small amount of cash might make sense if you need immediate liquidity, but for retirement purposes it is completely counterproductive. Because central banks pursue inflationary monetary policies, cash holdings are essentially guaranteed to lose money over time. A few years ago Germany\u2019s Bundesbank explained that real returns on bank savings accounts were historically negative<\/a><\/u><\/span><\/span>, meaning that savers who relied on holding cash lost money over the years.<\/p>\n

So now that we know that many baby boomers aren\u2019t in great financial shape, what lessons can be learned from their mistakes to make sure that future generations don\u2019t end up in the same situation?<\/p>\n

1. Start Saving Early<\/h2>\n

The power of compounding interest is incredible, but it\u2019s ignored by too many people. Let\u2019s say you\u2019re able to save $10,000 a year. If you save for 40 years, assuming a 6% annual return you\u2019ll have $1.64 million stashed away. But if you put off saving for the first five years of your career and only save for 35 years, you\u2019ll only have about $1.18 million saved up. That\u2019s almost 30% less just because you dallied for five years.<\/p>\n

Even if you\u2019re only able to save $5,000 per year, if you can save for 40 years you\u2019ll still end up with $820,000, nearly 70% of the savings of the person saving twice as much who only saved for 35 years. Someone who starts working after high school who might be able to save for 45 years will have 95% as much money saved up as the person saving twice as much per year who only saved for 35 years.<\/p>\n

And 6% is a relatively conservative estimate, historically speaking, over the course of 40 years. As the average rate of return increases, those numbers benefit those who saved earlier much more. At an 8% rate of return, the person saving $5,000 for 45 years has 12% more money at retirement than the person who saved twice as much per year for only 35 years. At a 10% rate of return the 45-year saver has 33% more money. The moral of the story is: make those early years count.<\/p>\n

For those who may already be near retirement age, it\u2019s not too late. There are catch-up contributions that you can make<\/a><\/u><\/span><\/span> towards a 401(k) or IRA if you\u2019re over 50 years old. Since your retirement may very well last 30 years or more, making those contributions today can ensure that those funds are making good gains now and still working for you when you\u2019re well into old age.<\/p>\n

2. Put Away As Much As You Can Afford<\/h2>\n

It\u2019s tempting to want to live the good life while you\u2019re young. Everyone wants a big house, a nice car, and good food. But living too extravagantly while you\u2019re young detracts from your ability to save, taking money away from your older self. It\u2019s far better to save more now so that you can enjoy life once you\u2019re no longer earning a salary.<\/p>\n

Even little purchases can add up over time. Ask yourself if you really need that $5 coffee every morning. At a 6% annual rate of return, that coffee is costing you $50 from your retirement funds; at 8% it\u2019s costing you over $100; at 10% it\u2019s over $200. Buy that coffee every day and you could cost yourself dearly in retirement.<\/p>\n

3. If You Have A 401(k), Max It Out<\/h2>\n

Far too many people fail to take advantage of their employer-sponsored retirement plans. If your employer offers a 401(k), and especially if they offer matching contributions<\/a><\/u><\/span><\/span>, try to max out your contributions. Matching contributions are free money. Even if stock markets decline, you\u2019ve still come out ahead. And once you\u2019ve vested, that money is yours to take with you if you ever change jobs or want to roll over those funds into another retirement account. If you put $200 a month into a 401(k) and your employer matches, you\u2019re up to nearly $5,000 a year. And because that money comes out of pre-tax dollars before you see your paycheck, you\u2019ll never even realize it\u2019s missing, even though you\u2019re building up a nice little nest egg.<\/p>\n

4. Diversify Your Portfolio<\/h2>\n

Don\u2019t put all your eggs in one basket. Stocks, bonds, and mutual funds all have their place in a portfolio, but at the end of the day they are all dependent on the health of Wall Street. If financial markets crash, so will your retirement portfolio. Alternative assets such as real estate, commodities, precious metals, etc. can provide some much-needed diversity to your retirement account. You obviously want to do your due diligence and evaluate all the risks, but a little bit of diversification can help ensure that your portfolio isn\u2019t completely exposed to the booms and busts of stock markets.<\/p>\n

5. Purchase Precious Metals<\/h2>\n

One of the easiest ways to diversify a portfolio and protect your retirement savings is through holding precious metals like gold and silver. They\u2019re not complicated assets and anyone can follow their prices online or in the newspaper. Gold and silver have served as stores of wealth for millions over the centuries, and will continue to do so well into the future.<\/p>\n

Many financial writers like to downplay gold, not realizing that it\u2019s had an annualized return of about 7.6% since President Nixon closed the gold window in 1971. If you had purchased $10,000 in gold in 1971 (equivalent to about $50,000 in current dollars) and not touched it at all until today, it would be worth nearly $300,000. That\u2019s not a bad return.<\/p>\n

Obviously you don\u2019t want your entire portfolio in gold because that defeats the purpose of diversification, but a decent chunk of your retirement savings can provide a good hedge against inflation and protect your savings from losing value in the event of a market downturn.<\/p>\n

With a gold IRA,buying gold is easier than ever. You can benefit from owning gold and silver while still receiving the same tax advantages that conventional IRAs enjoy. But as with any asset, time is of the essence. The earlier you start, the better off you will be in the future. Don\u2019t wait any longer than you have to in order to help secure your retirement.<\/p>\n","protected":false},"excerpt":{"rendered":"

A recent survey has shown that baby boomer investors have far less money saved up in their defined contribution plans than they should. That survey of investors found that <\/p>\n","protected":false},"author":3,"featured_media":22159,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[213],"tags":[],"class_list":["post-22647","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retirement"],"acf":[],"yoast_head":"\nBaby Boomers Are Not Prepared For Retirement - Are You? | Goldco<\/title>\n<meta name=\"description\" content=\"A recent survey has shown that baby boomer investors have far less money saved up in their defined contribution plans than they should. 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