Currently there are around 77 million baby boomers that are at or near their retirement age. The 401(k) retirement plan along with the two financial crises in the 2000s is going to turn their retirement planning into a nightmare. Thousands of savers lost huge parts of their savings in the burst of the dot-com bubble in 2000 and the current recession. According to Associated Press about 20% of their retirement savings were lost in the crisis, and even though they were restored to some extent, they were still 2.6% lower than in the previous year. Additionally, many of the baby boomers have not been saving enough throughout their careers. This is causing the baby boomers to continually postpone their retirement and to give up on their “dream” retirement: travelling, buying a second home etc. In order to maintain the lifestyle they were used to after they stop working many elderly people are forced to work longer than they expected. In 2008 around 25% of Americans in the age bracket of 65 to 74 were employed, and at this moment, around 9% of Americans between the ages 75 to 84 are still working.
Around 66 million workers in the US are currently covered by a 401(k) retirement plan which was not even initially designed as pension plan but instead as “a tax shelter for end-of-the-year bonuses for bankers”. Many experts now argue that the 401(k) plan is very difficult to arrange even for professionals let alone the baby boomers that were used to the old defined-benefit pension plan. They don’t know how much they will need after retirement, how much to put aside, and what to invest in. In order to prevent these retirement problems for the future generations of Americans it is necessary to either alter the retirement planning system or to teach them how to save so as to have the dream retirement they deserve.
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