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iPaying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Paying for the New Retirement: Responsibilities and Challenges
for Middle-Income Boomers By Bankers Life Center for a Secure Retirement
July 2016
168600
Table of contents
3 Methodology and definitions
5 Introduction
6 Key findings
9 Challenges in the new retirement
15 Boomers’ retirement knowledge and preparedness
23 Consequences of an unprepared retirement
31 Recommendations for middle-income Boomers
32 About the Center for a Secure Retirement
2 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Methodology and definitions
3Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 3
Methodology and definitions
This study from the Bankers Life Center for a Secure Retirement—Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers—was conducted in March 2016 by the independent research firm The Blackstone Group.
The internet-based survey consisted of a nationwide sample of 1,001 middle-income Americans age 52 to 75; Boomers age 52 to 70 made up 893 of the sample. Quotas were established based on the U.S. Census Current Population Survey data for age, gender and income to obtain a nationally representative sample. The margin of error is +/- 3.1 percentage points at the 95% confidence level.
Multiple answers were accepted on some questions; results on these questions sum to greater than 100%.
For the purposes of this study, the Bankers Life Center for a Secure Retirement used the following definitions:
What is middle income? Middle-income Americans have an annual household income between $25,000 and $100,000 and have less than $1 million in investable assets.
Who is a Boomer? Boomers are Americans born between 1946 and 1964 and are 52 to 70 years old in 2016.
Who is retired?Respondents to the survey self-identified as retired or nonretired, regardless of their work status.
4 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Introduction
5Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 5
Today, about four in 10 (39%) members of the Boomer generation identify themselves as retired. As Boomers are a large and dynamic generation, the Bankers Life Center for a Secure Retirement is checking in with middle-income Boomers to see how retirement is unfolding for this generation.
This generation is on the leading edge of the “new retirement”—the transition from institutional responsibility for retirement financial security to an increasing amount of individual responsibility.
However, we found that most Boomers have not done enough to adequately prepare for their retirement years. In fact, seven in 10 (69%) Boomers admit that they do not have or do not know if they have the financial resources to live comfortably in retirement to age 85, the average life expectancy of a 65-year-old Boomer today. And that number climbs to eight in 10 (83%) who admit that they do not have or do not know if they have the financial resources to live in retirement to age 95 even though 10% of Boomers will live to at least that age.*
Boomers are making adjustments to meet the new financial challenges they are facing in retirement. The Boomer experience may provide a cautionary tale for generations to follow. More education, more advice and guidance, and ultimately more retirement savings will be necessary for middle-income Americans to live comfortably in their retirement years.
Introduction
*U.S. Social Security Administration, “Calculators: Life Expectancy,” Accessed May 5, 2016. https://www.ssa.gov/planners/lifeexpectancy.htmllifeexpectancy.html
Retirement status ofmiddle-income Boomers
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=893
39%Retired
61%Not retired
6 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 20166
Key findings
Five years since the first Boomer turned age 65, middle-income Boomers report experiencing financial challenges.■■ Six in 10 (60%) nonretired middle-income Boomers report they are spending as
much or more than their household income.
■■ Four in 10 (38%) retired middle-income Boomers have had to make adjustments to compensate for a financial shortfall in retirement.
Boomers are in the middle of a retirement transition, as fewer employers provide their workers with a lifetime defined benefit pension payout.■■ Half (48%) of retired middle-income Boomers will include a regular pension payment from
an employer as part of their retirement income. Of Boomers not yet retired, only one-third (33%) indicate they will benefit from a regular pension payment from an employer.
■■ Eight in 10 (80%) retired middle-income Boomers rely on Social Security or an employer pension to be their primary source of retirement income, while just one in 10 (12%) rely on retirement accounts, savings or employment as their primary source of retirement income.
Highlights
■■ Five years since the first Boomer turned age 65, middle-income Boomers report experiencing financial challenges.
■■ Boomers are in the middle of a retirement transition, as fewer employers provide their workers with a lifetime defined benefit pension payout.
■■ Middle-income Boomers say they are knowledgeable about and familiar with their retirement options, but they are not actively using this knowledge.
■■ Middle-income Boomers are not confident in their retirement finances and are unsure of the best ways to maximize their retirement income.
■■ Middle-income Boomers continue to carry significant debt into retirement.
7Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 7
Middle-income Boomers say they are knowledgeable about and familiar with their retirement options, but they are not actively using this knowledge.■■ More than eight in 10 (84%) middle-income Boomers consider themselves to be at
least somewhat financially literate, with nearly one-half (47%) who feel they have a strong understanding of financial matters.
■■ Aside from making retirement account or savings contributions, only six in 10 (61%) middle-income Boomers have taken at least one additional active retirement planning step. Nine in 10 (91%) do not have a written retirement plan.
Middle-income Boomers are not confident in their retirement finances and are unsure of the best ways to maximize their retirement income.■■ Nearly nine in 10 (88%) middle-income Boomers express at least one concern
about their retirement, including government decisions on budgets and spending (64%), declining health (56%), not having enough money to pursue their interests (52%) and lack of savings (50%).
■■ Seven in 10 (69%) Boomers do not believe or do not know if they have enough money to live comfortably to age 85.
■■ Seven in 10 (72%) retired middle-income Boomers say they were not financially prepared when they retired. One in 10 (14%) say they were not financially prepared at all.
■■ Among middle-income Boomers who know when they will begin collecting Social Security, three-quarters (78%) say that they will wait to age 65 to start collecting these benefits. However, in reality, only about four in 10 (38%) do.
Middle-income Boomers continue to carry significant debt into retirement.■■ Eight in 10 middle-income Boomers (81%) currently have some debt.
■■ Three in 10 (28%) middle-income Boomers say that they devote more than 40% of their monthly income to debt.
■■ One-quarter (23%) of middle-income Boomers have a mortgage with more than 20 years remaining on it.
■■ While half (53%) of nonretired middle-income Boomers say they intend to enter retirement debt free, only one-quarter (23%) of retirees actually are debt free.
8 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
9Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Challenges in the new retirement
The Boomer generation—estimated at 74.9 million Americans age 52 to 70 in 2015—is in the midst of a significant transition to retirement. Among middle-income Boomers, currently four in 10 (39%) describe themselves as retired with more retiring every day.
However, many in this generation are experiencing financial challenges as they approach and enter retirement.
Six in 10 (60%) nonretired middle-income Boomers report they are spending as much or more than their household income, possbily making it difficult to build their retirement savings. Of those who are spending more than their income, more than half (55%) say that it is because of bills, debt, loans or other household expenses. About one in six say that it is because of health or medical issues (15%), employment status (15%) or simply low income (13%).
Household spending versus incomeAmong nonretired middle-income Boomers
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=545
60% are spendingabout the sameor more thantheir householdincome
12%I spent more
than my income
I spent aboutthe same
as my income
I spent muchless than
my income
I don’t know
48%
37%
3%
10 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201610
Retired Boomers already facing shortfalls in retirement financesRetired middle-income Boomers also report financial challenges. Four in 10 (38%) have already had to make adjustments to compensate for a financial shortfall in retirement. Of these retired middle-income Boomers that have faced a financial shortfall, nearly nine in 10 (88%) cut expenses, three in 10 (30%) sold possessions, two in 10 (20%) decided to work for pay and one in six (15%) had to ask family or friends for help. Nearly one in 10 (7%) have had to sell or remortgage their house.
10
Retired middle-income Boomers who have made adjustments
because of a �nancial shortfall
88%Cut expenses
n=348
Compensating for a �nancial shortfall in retirement
n=133
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
Yes38%
No62%
Sell possessions
Work for pay
Ask family or friendsfor finanical assistance
Invest more aggressively
Sell or remortgage house
Move in with family or friend
Other
30%
20%
15%
8%
7%
5%
8%
Adjustments made by retired middle-income Boomers to
compensate for a �nancial shortfall
11Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 11
Retirement in transitionThese financial challenges come at a time when Boomers are experiencing the realities of the transition to the “new retirement.” When they entered the workforce, Boomers worked for employers who took on much of the burden of retirement income for their employees by providing a lifetime defined benefit pension payout. However, as Boomers moved closer to retirement, many employers ended those programs in favor of defined contribution retirement plans, such as 401(k) plans, IRAs and annuities. This shift places more of the burden and responsibility for creating retirement financial security on the individual employee.
This transition is evident in the Boomer generation today. Half (48%) of retired middle-income Boomers receive a regular pension payment from an employer as part of their retirement income. These retired Boomers are significantly more likely to be age 60 or older. Conversely among Boomers not yet retired—who are significantly more likely to be younger than age 60—only one-third (33%) indicate they expect to receive a regular pension payment from an employer.
Middle-income boomers who receive or will receive an employer pension in retirement
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
Retired
48%
33%
Nonretired
n=348 n=545
12 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201612
Many middle-income Boomers rely primarily on Social Security and employer pensionsToday, because fewer middle-income Boomers will be able to rely on pensions as a guaranteed lifetime source of income, they will need to depend more on personal savings and other sources of income.
However, eight in 10 (80%) retired middle-income Boomers rely on Social Security or an employer pension to be their primary source of retirement income, while just one in 10 (12%) rely on personal investments, savings or employment as their primary source of retirement income.
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=348
Primary sources of retirement incomeAmong retired middle-income Boomers
80%rely primarily ongovernment or employer
Social Security benefits 51%
A regular pension paymentfrom an employer 29%
Retirement accounts (such as 401(k) plans,IRAs or annuities) 7%
General savings and investments 4%
Employment earnings 1%
Money from an inheritanceor family support 1%
Other or not sure 7%
12%rely primarily onpersonal investments,savings or employment
13Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 13
Social Security a primary source of retirement income for many BoomersAmong retired middle-income Boomers, more than eight in 10 (84%) say that Social Security benefits make up at least a part of their retirement income, while half (51%) say that it is their primary source of retirement income.
However, Social Security was never intended to be the primary source of one’s retirement income, and benefit amounts may not be enough to sustain a lifestyle retired Boomers may envision.
According to the Social Security Administration, the average personal benefit is $1,708 per month, or about $20,000 per year.i
Among Americans who receive Social Security benefits, excluding disability benefits, nearly nine in 10 (88%) receive a yearly personal benefit of less than $24,000 per year. About one-third (31%) receive a yearly personal benefit of less than $12,000, barely above the $11,000 federal poverty line for individuals.ii
Average Social Security bene�tsAmong Americans who receive Social Security benefits, excluding disability benefits
Source: Calculated from data in U.S. Social Security Administration, Annual Statistical Supplement, 2015. Released April 2016, https://www.ssa.gov/poli-cy/docs/statcomps/supplement/2015/5b.pdf.
88% recieve less than$24,000 per year
12%
More than$24,000 per year
57%
Between$12,000 and
$24,000 per year
Less than$12,000per year
31%
14 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
15Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Boomers’ retirement knowledge and preparedness
More than eight in 10 (84%) middle-income Boomers consider themselves to be at least somewhat financially literate. Nearly one half (47%) feel they have a strong understanding of financial matters.
In addition, most middle-income Boomers say they are aware of the most common types of retirement accounts. Three-quarters (74%) of middle-income Boomers say they are confident in their understanding of 401(k) accounts with about two-thirds who say they are confident in IRAs (68%) and pensions (65%). But only about half are confident in their understanding of annuities (51%) and Roth IRAs (48%).
Middle-income Boomers’ assessmentof their �nancial literacy
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=893
84% considerthemselves atleast somewhatfinancially literate
14%
33%
37%
13%
3%
5Veryliterate
1Not at all
literate
4
3
2
Middle-income Boomers who are con�dent that they understand the most common types of retirement accounts
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=893
401(k)
74%
IRA Pension/defined benefit
Annuity Roth IRA
68% 65%
51% 48%
16 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201616
Not enough retirement planningBeyond simply contributing to a 401(k) or other retirement account, financial security in retirement depends on taking a number of active planning steps. Despite their stated familiarity with common types of retirement accounts, middle-income Boomers are not yet doing enough to plan for their own retirement.
Only six in 10 (61%) middle-income Boomers—including those who have already retired—have done any active retirement planning beyond contributions to a retirement or savings account. Nine in 10 (91%) do not have a written retirement plan.
Three-quarters (75%) of middle-income Boomers have not calculated a monthly retirement income number goal that they need to reach.
Eight in 10 (79%) middle-income Boomers do not know what percentage of their pre-retirement income they feel comfortable living on in retirement.
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
Methods used for �nancial planning for retirementAmong retired and nonretired middle-income Boomers
n=893
Taken at leastone retirementplanning step
39%
61%
Calculateda monthlyretirement income goal
75%
25%
Calculateda percentage ofpre-retirementincome to live
on in retirement
79%
21%
Worked witha financial
professional
80%
20%
Calculatedan account
balance goal
88%
12%
Developed a writtenretirement
plan
91%
9%
No Yes
Taken allretirementplanning
steps
99%
1%
17Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 17
One-third are starting lateNearly one-third (32%) of middle-income Boomers who have taken at least one retirement planning step did not start planning until after age 50. Six in 10 (58%) started planning after age 40.
When middle-income Boomers started retirement planningAmong those who have taken at least one retirement planning step
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=506
<20
3%
20–29 30–39 40–49 50–59 60 orolder
15%
24%26% 27%
5%
32% start planningafter age 50
18 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201618
Planning early makes a differenceMiddle-income Boomers who started retirement planning before age 30 are more likely to have higher levels of investable assets than those who started after age 50.
More than one in 10 (13%) middle-income Boomers who started retirement planning before age 30 reported investable assets between $500,000 and $1 million, compared to just one in 20 (6%) of those who started planning after age 50.
On the other hand, less than four in 10 (37%) middle-income Boomers who started retirement planning before age 30 reported investable assets less than $100,000, compared to nearly two-thirds (63%) of those who started planning after age 50.
n=162
Middle-income Boomers’ investable assets
Among those who started retirementplanning before age 30
Among those who started retirementplanning at age 50 or older
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=88
Between $500,000 and
$1 million13%
Less than$100,000
37%
Between $100,000 and
$500,000 51%
Less than$100,000
63%
Between $100,000 and
$500,000 31%
Between $500,000 and
$1 million6%
19Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 19
Retirement and investment concernsNearly nine in 10 (88%) middle-income Boomers expressed at least one concern about retirement, and nearly half (47%) say that they think about their retirement finances frequently or all the time.
Retirement issues middle-income Boomers report being concerned about include:
■■ Decisions made by the federal government regarding budgets and spending (64%)
■■ Declining health (56%)
■■ Not having enough money to do the things they want to do (52%)
■■ Not having enough money saved (50%)
■■ Not being able to afford health care expenses (48%)
■■ Investments not keeping up with inflation (45%)
■■ Outliving their money (43%)
■■ Not being able to retire (42%)
■■ Not having enough energy to do the things they want to do (41%)
■■ Low interest rates or low market return on their investments (40%)
How often middle-income Boomers think about retirement �nances
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=893
Never
3%
Rarely Sometimes Frequently Almost allthe time
13%
36%
32%
15%
47% Think about retirementfinances frequently or
almost all the time
Middle-income Boomerswho are concerned aboutretirement-related issues
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=893
12%Not
concernedabout any
88%Concerned
about one ormore issues
20 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201620
Middle-income Boomers lack confidence in their financesMore than two-thirds (68%) of middle-income Boomers rate their current financial well-being as average or worse.
How middle-income Boomers rate their current �nancial well-being
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=893
68% rate theirfinancialwell-being asaverage or worse
6%
26%
45%
16%
7%
5Excellent
1Very poor
4
3
2
21Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 21
Unsure whether they will have enough money for retirementOn average, Boomers today can expect to live to around age 85, according to the Social Security Administration.iii
However, seven in 10 (69%) Boomers do not believe or do not know if they have enough money to live comfortably to age 85, and more than eight in 10 (83%) do not believe or do not know if they have enough money to live comfortably to age 95, even though one in 10 Boomers can expect to live this long.
n=893
Middle-income Boomers’ outlook on �nancial security and longevity
Con�dence in �nancial security to age 85 Con�dence in �nancial security to age 95
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
31%Not sure
31%Yes
38%No
69%Are not sure
they haveenough money
to live to age 85
17%Yes
51%No
32%Not Sure83%
Are not surethey have
enough moneyto live to age 95
22 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201622
23Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Consequences of an Unprepared Retirement
Seven in 10 (72%) retired middle-income Boomers say there were not financially prepared when they retired. One in 10 (14%) say they were not at all financially prepared.
But simply considering oneself financially prepared at retirement is not foolproof. Ongoing evaluation and maintenance are required throughout one’s retirement years.
Even among retired middle-income Boomers who said they were financially prepared for retirement, about one-quarter (23%) said they still had to make adjustments to their spending to compensate for a financial shortfall.
Financial preparation for retirementAmong retired middle-income Boomers
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=348
72% say they werenot financiallyprepared forretirement
9%
29%
33%
15%
14%
5Veryprepared
1Not at allprepared
4
3
2
Compensating for a retirement shortfallAmong retired middle-income Boomers who said they were financially prepared for retirement
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=133
23%Yes, I have
had to makeadjustments
77%No, I have nothad to makeadjustments
24 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201624
One-third unsure about full retirement ageAccording to a 2013 study by the Bankers Life Center for a Secure Retirement, more than one-third (36%) of middle-income Americans falsely believe that full Social Security benefits start with their 65th birthday.iv
The full retirement age for the oldest Baby Boomers, those born in 1946, is now age 66. The youngest Boomers, born in 1964, will not reach full retirement age for Social Security benefits until they turn age 67.
Year of birth Full retirement age
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67
Source: U.S. Social Security Administration, Retirement Planner Benefits by Year of Birth 2016. https://www.ssa.gov/planners/retire/agereduction.html.
Age to receive full Social Security benefits
25Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 25
Most take Social Security before full retirement ageDelaying Social Security retirement benefits until one’s full retirement age can lead to increased monthly benefit amounts—approximately an 8% increase for every year one waits up to age 70.
Although middle-income Boomers say that they will wait to start collecting their Social Security retirement benefits (excluding disability benefits), in reality, recipients begin collecting much earlier.
Among middle-income Boomers who know when they will begin collecting Social Security, three-quarters (78%) say that they will wait to age 65 to start collecting these benefits, and more than one-third (36%) say they will wait until age 67 or later. However, according to the Social Security Administration, less than four in 10 (38%) actually begin collecting at age 65 or later, and only one in 20 (6%) begin collecting at age 67 or later.v
Only one in five (19%) say they will start collecting as soon as they are eligible at age 62. Data from the Social Security Administration indicates that 46% of recipients receive benefits at age 62.
Sources: *Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016. **Calculated from data provided in: U.S. Social Security Administration, Annual Statistical Supplement, 2015. Released April 2016, https://www.ssa.gov/policy/docs/statcomps/supplement/2015/6b.html.
When middle-income Boomers start collecting Social Security retirement bene�tsAmong those who know when they will start collecting
Age 62 Age 63
19%
46%
When middle-income Boomers expect to start (n=378)* When Social Security recipients actually start collecting**
Age 64 Age 65 Age 66 Age 67–69 Age 70
2%
8%
1%
8%
29%
13% 13%
20% 19%
3%
17%
3%
78%Nonretirees plan to begin collecting
at age 65 or later, but only 38% actually do
26 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201626
Boomers carrying debt into retirementTotal Boomer debt is currently estimated to be $6.1 trillion.vi In our survey, more than eight in 10 middle-income Boomers (81%) report having some debt. Retired middle-income Boomers are slightly more likely to be debt free, with nearly one-quarter (23%) of retirees reporting that they do not have any debt versus one-sixth (16%) of nonretirees who report no debt.
Of all types of debt, credit cards are most common—more than half (53%) of all middle-income Boomers currently have some credit card debt, regardless of retirement status.
In addition, more than four in 10 (44%) currently have a mortgage, including four in 10 (39%) retirees. Other debt held by middle-income Boomers includes auto (33%), medical (17%), student loans (9%) and personal debt to another family member (7%).
Sources: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
Debt held by middle-income Boomers
Credit card Mortgage Auto loan Medical Student loan(for self or otherfamily member)
Personal debtto family member
or friend
Other
56%
48%
33%
16%
11%7%
2%
53%
44%
33%
17%
9%7% 6%
19%
48%
39%
31%
18%
6% 5%2%
23%
16%
Retired (n=348)Total Not retired (n=545)
No debt
27Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 27
Many retirees using income to pay down debtAccording to the Pew Survey of American Family Finances, 70% of Boomers view debt as a positive force—something that expanded their opportunities by allowing them to make purchases they otherwise could not afford.vii However, many Boomers are still carrying much of the debt that financed earlier purchases, making it likely that debt will restrict, rather than expand, their opportunities in retirement.
Three in 10 (28%) middle-income Boomers say that they devote more than 40% of their monthly income to paying down debt.
Boomers making mortgage payments well into retirementMore than four in 10 (44%) middle-income Boomers own their home outright. However, among those who currently have a mortgage loan, nearly one-quarter (23%) have more than 20 years remaining on it.
A 2014 study by the Bankers Life Center for a Secure Retirement found that for many middle-income Boomers, much of their net worth is in their home. The median home equity value reported by survey participants was $100,000 to $250,000, whereas their median investable assets were $25,000 to $100,000.viii
Paying down debtPercentage of monthly income middle-income Boomers devote to paying down debt
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
1–20%of monthly income
35%
n=693
21–40%of monthly income
More than 40%of monthly income
32%28%
Years remaining on middle-income Boomers’ mortgages
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
n=396
14%
Don’t know11–20 years
32%
21+ years
23%
31%
1–10 years
28 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201628
Despite intentions, few retirees are debt freeWhile half (53%) of those not yet retired say that they intend to enter retirement debt free, less than one quarter (23%) of retirees actually report being debt free.
Paying off debt before retirementExpectations vs. reality
Source: Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016.
Nonretired middle-incomeBoomers who plan
to pay off debtbefore retiring (n=459)
53%
23%
Retired middle-incomeBoomers who aredebt free (n=348)
29Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016 29
30 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201630
31Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 2016
Recommendations for Middle-Income Boomers
Research Social Security optionsSocial Security is a rather complex program. Do your research or work with a professional to develop a well-informed plan for when to tap into your Social Security benefits. In particular, know your full retirement age. Delaying your benefits until your full retirement age can result in a higher income check from Social Security for the rest of your life. This can be particularly valuable if you come from a family that tends to live a long time.
If you’re unsure of your benefits, visit SocialSecurity.gov to sign up for access to personal data on your benefits through the government’s MySocialSecurity program.
Aggressively pay down debt Prior to retiring, strive to pay off as much debt as possible, including any mortgage. Debt payments should ideally be no more than 10% of your income when you retire. Of course being debt free is even better. By making a concerted effort to pay down debt before retiring, you will give yourself more of the financial flexibility you may want or need to have in retirement.
Minimize your monthly billsMonthly fixed expenses reduce your flexibility to adapt to changing financial needs or react to unexpected expenses that may arise in retirement. Consider reducing fixed expenses in discretionary expenses first such as your cable or mobile phone bill.
Seek employment incomeIf you’re able, consider remaining in or rejoining the workforce in some capacity. Whether you choose to work full-time, part-time or on a project or seasonal basis, employment income will relieve pressure on your other sources of income. Plus, many jobs may provide access to valuable employee benefits.
Develop a planIt is never too late to improve the outlook for your retirement financial security. Even if you started your preparation for retirement late, or have not started in earnest yet, putting an informed plan in place will give you insight into what steps to take now and what steps you may need to take in the future. A financial professional with experience in retirement planning can be an extremely valuable resource in building your plan and helping you find savings products that can provide a reliable monthly income.
32 Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers | July 201632
About the Center for a Secure Retirement
The Bankers Life Center for a Secure Retirement is the company’s research and consumer education program. Its studies and consumer awareness campaigns provide insight and practical advice to help everyday Americans achieve financial security in retirement.
About Bankers Life With a history dating back to 1879, Bankers Life focuses on the insurance needs of the retirement market. The nationwide company, a subsidiary of CNO Financial Group, Inc., offers a broad portfolio of life and health insurance products and annuities designed especially for Boomers and retirees.
Bankers Life has more than 5,000 licensed professional agents in more than 300 offices across the United States. Bankers Life agents meet with thousands of Americans each week for initial retirement reviews at no cost to clients.
Learn more To learn more about Bankers Life, visit BankersLife.com or call (800) 231-9150.
Endnotes
i U.S. Social Security Administration. Annual Statistical Supplement, 2015. Released April 2016, https://www.ssa.gov/policy/docs/statcomps/supplement/2015/5b.pdf.
ii U.S. Department of Health and Human Services, “U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs.” January 25, 2016. https://aspe.hhs.gov/poverty-guidelines.
iii U.S. Social Security Administration, “Calculators: Life Expectancy,” Accessed May 5, 2016. https://www.ssa.gov/planners/lifeexpectancy.html
iv Bankers Life Center for a Secure Retirement, Longevity Risk and Reward for Middle-Income Americans, 2013.v Calculated from data provided in: U.S. Social Security Administration, Annual Statistical Supplement, 2015. Released
April 2016, https://www.ssa.gov/policy/docs/statcomps/supplement/2015/6b.html.vi Deloitte Center for Financial Services, The future of wealth in the United States: Mapping trends in generational wealth.
November 2015, http://dupress.com/articles/us-generational-wealth-trends/. vii The Pew Charitable Trusts, The Complex Story of American Debt, July 2015, http://www.pewtrusts.org/~/media/
assets/2015/07/reach-of-debt-report_artfinal.pdf.viii Center for a Secure Retirement, The Middle-Income Boomer Retirement Gap: Savings, Education and Advice, November 2014
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Bankers Life Center for a Secure RetirementCenterForASecureRetirement.com
Media ContactJennifer Born
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Study ContactCarrie Jost
(312) [email protected]
Bankers Life is the marketing brand of Bankers Life and Casualty Company, Medicare Supplement insurance policies sold by Colonial Penn Life Insurance Company and select policies sold in New York by Bankers Conseco Life Insurance Company (BCLIC). BCLIC is authorized to sell insurance in New York.
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