Nearly Half of Baby Boomers Haven't Saved Enough for Retirement

What Does It Mean for Marketers If This Free-Spending Generation Starts Saving More?

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Nearly half of baby boomers are "at risk" of running out of money during retirement, according to a new study from the Employee Benefit Research Institute. The "Retirement Readiness Rating" found that nearly one-half (47.2%) of the older baby boomers might not have enough retirement money to cover basic costs and health care. Younger boomers fare slightly better with 43.7% at risk. Gen-Xers aren't looking too good either, with 44.5% potentially in trouble.

The younger boomers (45- to 54-year-olds) are in their top earning and spending years, according to the latest Bureau of Labor Statistics data, with older boomers (45 to 54-year-olds) not far behind. Their spending has helped fuel the U.S. economy for decades. In 2008, total spending by boomers was $2.65 trillion.

Jack VanDerhei, EBRI's research director, thinks the boomers will fall into two categories: Those who try to maintain their current lifestyle as they retire and then run out of money in five to 10 years, or they'll cut spending on discretionary items like going out to eat, vacations and transportation. He predicts there will be more individuals in the first category, at least initially. They can forget about second homes. "They will be lucky if they have one home in many cases," Mr. VanDerhei said.

This should be a growing concern for marketers. In 2008 boomers spent $135.6 billion on dining out and $459.7 billion on transportation, two areas of spending ripe for cutting back if they start saving more toward retirement.

The "at risk" numbers have actually improved since EBRI first did this study in 2003. The researchers attribute this largely to the Pension Protection Act, which helped participation rates in 401K plans double to 80%. But for a generation that has seen their parents retire comfortably, they have a mindset that they will be able to weather retirement despite not having the pension and defined benefit plans that previous generations had.

"To an embarrassingly large extent they haven't done much financial planning," said Mr. VanDerhei.

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