The recession and slow recovery are preventing baby boomers from adequately saving for retirement. According to a new study by The Insured Retirement Institute, 30 percent of boomers stopped contributing to a retirement plan and 16 percent prematurely withdrew funds from a retirement plan in the past year.
The study also found that 22 percent of Boomers have no retirement savings and of those who said they do have retirement savings, 40 percent of those have saved less than $100,000.
“At a time when a quarter of Boomers reported difficulty paying the rent or the mortgage, it is easy to understand why saving for retirement has taken a back seat,” IRI President and CEO Cathy Weatherford said. “But as the economy recovers, it will be imperative that boomers get back on the path toward a financially secure retirement. Working with a financial advisor could be just the ticket, as 43 percent of Boomers who have consulted a financial advisor have the highest levels of confidence in achieving financial security throughout their retirement years.”
The study acknowledged that new features like automatic enrollment, default investment options and auto-escalation of contributions have become more prevalent among employment-based retirement savings plans, but expressed concern that “these passive efforts may not be enough to ensure individuals reach retirement with an adequate amount of savings. Individuals need to be more engaged in retirement planning.”
IRI also found that potential tax increases could add a new obstacle to saving for retirement. More than half of Boomers would be less likely to save for retirement if federal income taxes were increased. Additionally nearly 40 percent would be less likely to save if capital gains taxes were increased and 36 percent would be less likely to save if Social Security taxes increased. If incentives to save for retirement, such as tax-deferred growth for retirement plans and annuities, were to be reduced or eliminated, a quarter of boomers would be less likely to save for retirement.
More individuals are looking at annuity products to provide a safety net for their hard-earned savings. A study by IRI and Cogent Research found that 63 percent of investors stated that increased volatility makes them more likely to consider an annuity. In addition, 74 percent of financial advisors noted the volatility in financial markets makes it easier for them to sell annuities.
The Insured Retirement Institute is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry.