Baby Boomer generosity puts retirement at risk

November 18, 8:10 AMBaby Boomer ExaminerPaul Briand

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It's said that most Baby Boomers are woefully ill-prepared for their retirement with a lack of savings.

So, where did the money go?

Baby Boomers are said to have a lot of discretionary income, and their self-indulgence certainly accounts for their spending, rather than their saving. And, for those who did manage to put away some savings in the stock market, those nest eggs are cracked and leaking as a result of Wall Street's unprecedented drop, forcing some to put off their retirement plans and keep on working.

But that doesn't fully answer why Boomers aren't financially ready for retirement.

Part of the reason, according to Ameriprise Financial, is that Baby Boomers have been very, very generous to their adult children.

Ameriprise compiled a sweeping study, "Money Across Generations." The study, as the name implies, looked at how Baby Boomers, their parents and their adult children perceive, talk about and deal with issues surrounding money and finances.

With regard to retirement it noted recent data from the Employee Benefit Research Institute reveals that one in four Boomers has saved less than $10,000 for their retirement; another 45 percent have saved less than $50,000.

Compare that with the expectation that a 65 year old American male retiree can expect to live 18 years in retirement. An estimated calculation shows that he would need a nest egg of $1.6 million to provide an annual income of $70,000 in retirement.

So, where did the money go?

One in six Boomers is providing assistance not only to their adult children but to their parents as well, according a study fact sheet. They are:

• Buying groceries (22 percent),
• Helping with medical expenses and utility bills (15 percent each),
• Contributing to rent/mortgage payments and long-term care (10 percent each).

And more than 90 percent of Baby Boomers are helping their adult children in one way or another:

• More than two-thirds (69 percent) are helping their adult children pay off college loans or tuition,
• More than half are contributing to the purchase of a car;
• More than one-third are helping to cover living costs that include co-signing loans or leases, medical insurance, rent and utilities, and car payments.

In order to be this "Generous to a Fault" (as the fact sheet is entitled) half of Boomers said they are using their day-to-day spending money to assist their adult children, while 40 percent are drawing from their “regular savings,” and one in six is taking a loan to lend a hand. Six percent say they pull money from their retirement savings to help their adult children.