On average, Baby Boomers say they've only saved slightly more than a third of what they'll need in order to live comfortably in retirement. However, they're eligible for catch-up contributions to help them bridge that shortfall.
On average, Baby Boomers say they’ve only saved slightly more than a third of what they’ll need in order to live comfortably in retirement, according to a TD Ameritrade survey.
The recent Investor Index Survey revealed that Americans over the age of 50 have saved, on average, $275,000 for retirement, but they’ll need approximately $750,000 to live comfortably, leaving a $475,000 retirement saving shortfall. They’re not alone — half of the world is unprepared for retirement.
Lucky for those facing such a large shortfall, there are provisions in Traditional and Roth IRAs that allow participants over the age of 50 to make catch-up contributions, typically $1,000 above the normal contribution amount.
"Baby Boomers should consider different opportunities, like catch-up contributions, that might make sense for their retirement investing plans," Lule Demmissie, managing director, retirement, TD Ameritrade, said in a statement. "By not taking advantage of these catch-up contributions, they could potentially miss out on thousands, perhaps even hundreds of thousands of dollars that could be available in retirement."
The Baby Boomers who feel like that are financially prepared for retirement tend to be male, married, without children, started saving for retirement at 30 years old or younger and had parents who discussed money and saving for the future with them.
According to the survey’s results, the majority of Baby Boomers who are not yet retired believe they will require less than $100,000 a year to live comfortably. Those who consider themselves prepared for retirement are more likely than those who consider themselves unprepared to believe they will require more than $100,000 (18% and 11%, respectively).
However, almost half of all non-retired Baby Boomers don’t actually know how much they must save in total so they can achieve a standard of living during retirement that they find acceptable. On average, all non-retired Baby Boomers believe they need a median of $750,000, with prepared respondents expecting to need a median of $800,000 and unprepared respondents expecting to need a median of half a million.
"One thing for investors to remember is that it is never too late to start with plans to prepare for retirement,” Demmissie said. “It may just mean they have to adjust their retirement expectations, work a little longer or think of other means of support that they had never considered before. But it's never too late to get started."
See the full survey here. (PDF)