MILWAKEE JOURNAL SENTINEL
The savings gap continues to widen

The clock is ticking for baby boomers - and this time, it’s not their biological clocks. It’s the countdown to retirement, for which many boomers feel they are unprepared.

A new study conducted for Thrivent Financial for Lutherans found that 71 percent said a lack of money would prevent them from having the kind of retirement they want. The study of 2,500 people ages 45 to 60 was conducted in September and October. Much of this, of course, is the fault of those who haven’t saved. And some studies actually don’t paint as dire a picture, claiming that in terms of overall wealth, the generation born between 1946 and 1964 is actually pretty well off.

But a lot of them don’t feel like it.

There are several factors making saving for retirement more complicated for this generation.

For one thing, folks are living much longer than previous generations. And so are their parents.

So often they are sandwiched between the generation before and the one after them, providing care to both.

The number of Americans 65 and older rose 183 percent between 1950 and 2000, according to the Federal Deposit Insurance Corp. At the same time, fewer companies are offering pension programs - or offering as rich a program as in the past.

Furthermore, Social Security is under severe stress and will need big infusions of federal money in the coming years to meet its obligations.

And federal studies of estates show that most people will not be able to rely on inheritances to bail them out. So much for that rich uncle theory of retirement planning. So unlike their parents, baby boomers must rely to a much greater degree on their own savings. Yet they are falling short - way short in many cases.

Based on a review of outstanding balances in 401(k) accounts, the FDIC found that baby boomers in their 40s and 50s had no more than about $140,000 in their accounts as of 2003.

Many had considerably less. In the Thrivent survey, nearly 25 percent said they had saved nothing for retirement.

What to do?

First, start saving. The pension reform bill signed into law by President Bush earlier this year makes it easier for companies to automatically enroll employees in 401(k) retirement savings plans and select appropriate investments for them. That was a good thing.

But stronger medicine may be needed. Gene Sperling, a former adviser to President Clinton, recommends replacing the current tax breaks for retirement savings with universal 401(k) accounts in which the government would match family savings at different rates, depending on family income.

While the idea may have merit, there is concern that companies would cut back on providing matching funds if the government got into the game.

Clearly, attention should be paid to this issue.

By most accounts, baby boomers are nowhere close to having the kind of money they need in retirement, and that could be the kind of demographic train wreck that costs all of us big bucks to clean up in the long run.