Although they're already closing in on retirement, one-third of "transition boomers"--those ages 55 to 65 who are less than 10 years away from retirement--said they are unsure about how much money they will need to cover basic living expenses after they stop working, according to a survey released today by Allianz Life Insurance Company of North America.
The "Transition Boomers and Retirement Income Survey" polled more than 1,000 baby boomers in this age range. Twenty-five percent of them said they were uninformed about the effects of inflation. More than 40% may not have a realistic idea of when retirement planning should begin.
"It's alarming that so many boomers on the cusp of retirement are still unclear about the basic factors which determine their ability to fund their lifestyle once they stop working," said Walter White, president and CEO of Allianz Life.
"When you consider rising health-care costs and the devastating effects of inflation on purchasing power, the fact that so many transition boomers are still confused about retirement income planning is a significant issue which urgently demands more education," he added.
One-third of transition boomers polled said they were uncertain about their retirement income needs. Of those, 64% were ages 55 to 60 and 36% were between 61 and 65. When asked what their biggest concern in retirement was, 28% said they were worried that they would be unable to cover basic living expenses.
Transition boomers also significantly underestimate the impact inflation and taxes will have on their retirement. Thirty-two percent of them ranked health-care costs as the biggest worry, but only 10% feared inflation and only 6% pointed to taxes.
And yet, when respondents were asked to predict the cost of a loaf of bread in 2022 based on today's average price of $2.50, 75% predicted the cost would double to $5 in 10 years.
The survey also found concerning responses from respondents about where they expect to get their income in retirement. Ninety-four percent of transition boomers said they expect Social Security to play a role in their retirement income. Another 46% said pension plans would, while 43% said it would be 401(k) plans, 403(b)s and 457 plans. (Thirty percent said "other investments.") However, 30% indicated they expect some retirement income from part-time work and 20% anticipate income from either an inheritance (9%) or "other sources" (11%).
"Although many boomers say they'll work in retirement, studies show that many may have difficulty doing so due to layoffs, health issues or the need to care for other family members," said Katie Libbe, vice president of consumer insights for Allianz Life. "When only 14% say they can count on guaranteed income from an annuity and 20% expect an inheritance or income from 'other sources,' it's crucial for transition boomers to start thinking and talking about retirement income issues as soon as possible."
Unfortunately, many don't want to get started. According to the survey, 43% said they will not focus on retirement income strategies until they are less than five years from the start of retirement, and an astounding 16% said they are waiting until six months to one year prior. This means most transition boomers may not start planning far enough ahead to be able to make strategic choices about retirement income, Libbe said.
Still, some transition boomers are doing the right things. Of the 43% that indicated they will use income from a defined contribution savings account--such as a 401(k), 403b or 457 plan--57% said they have spoken to someone about what to do with that money once they retire. Among those respondents, 71% said the conversation was with a financial professional such as an advisor or attorney.
The Allianz Life Transition Boomers and Retirement Income Survey was conducted by Ipsos U.S. eNation online from June 6 to 8 with 1,095 respondents age 55-65, and was commissioned by Allianz Life.
--Jim McConville