Many surveys show that the majority of baby boomers aren’t prepared for retirement. They don’t have enough money in savings and many don’t have access to guaranteed retirement income outside of Social Security.

A study by the Insured Retirement Institute, Baby Boomers and Retirement Planning Strategy: Generating Retirement Income to Meet Expenditures, found that because boomers aren’t prepared for retirement, many of them face difficult choices about their standard of living in retirement.

Also see: 10 worst places to retire

Many people can save money in retirement by moving to an area with a lower cost of living. People who move to Harlingen, Texas, for instance, spend 83% of the national average for living expenses. People who live in Manhattan, N.Y., meanwhile, spend nearly 217% of the national average for living expenses, the IRI found.

“I’ll go out on a limb and venture that moving to Harlingen, Texas, which boasts the lowest cost of living in the country, is not a realistic option for most future retirees,” said IRI president and CEO Cathy Weatherford. “But many boomers will have to make some tough decisions.”

Four in 10 baby boomers say they have no retirement savings and 69% say they have no defined benefit pension plan. Of those boomers who do have retirement savings, nearly 60% have less than $250,000 saved up and 37% have less than $100,000 saved, according to the IRI.

Also see: 5 top overseas retirement destinations

With people living well into their 80s and 90s, that is not sufficient to get them through 30-plus years of retirement.

To close the retirement income gap, the IRI recommends that individuals delay their retirement until age 70. If they do that, their Social Security payments will be 132% more than the payment they would have received if they started taking their benefits at age 66. Lifetime annuity income is also less expensive at age 70 and working longer brings in additional income and savings while subtracting five years off the total retirement years that have to be covered by retirement savings.

People over the age of 50 can contribute an additional $6,000 per year into their workplace retirement plans. “Even assuming current contribution limits do not increase, if these ‘catch up’ contributions are made from age 50 to 70 and realize an average 5.5 percent pre-tax investment return, they will add over $239,000 to retirement savings,” according to the IRI.

Also see: Top 15 cities for jobs

Pre-retirees and retirees should lead healthier lifestyles because not only will they live longer but they will spend less on health care expenses in retirement. Many studies have shown that health care spending is the biggest expenditure most retirees make in their lifetimes.

If a person is only saving 3% in their workplace retirement plan, they need to boost that figure to at least 15%, says the IRI.

“Saving more and lowering expenses are intuitive steps toward achieving a dignified and well-funded retirement,” the report says. “Less intuitive, but quite important, are the tax implications of reducing expenses.”

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access