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Baby Boomers Falling Short of Financial Goals in Defined Contribution Plans

Investment decisions by Boomers, Gen-Xers and Millennials still influenced by the global financial crisis.



Retirement savings for the nation’s baby boomers appear to be well below the pace needed to fund their later years and achieve the lifestyle and financial goals they seek, according to the recently released Legg Mason 2017 Global Investment Survey.

Among all age groups, meanwhile, the survey noted that two-thirds of investors in the U.S. say decisions related to investing are still influenced by the 2008 financial crisis that swept across the globe, resulting in significant declines in world stock markets. The sentiment was most acute among millennials–the age group Legg Mason defines as 18 to 35–with 85% describing themselves as either somewhat or very conservative.

Baby boomers, soon to enter retirement or already there, may be finding themselves falling short of achieving their basic retirement goals. Those boomers invested in defined contribution (DC) plans, for example, have an average of $263,000 saved in these plans, less than half of the $658,000 they say they will need by retirement. Older baby boomers, 65 to 74, are also falling short of this goal with an average of $300,000 saved in their DC plans.

Baby boomers, which Legg Mason pegs as ages 53 to 71, may also be too conservatively invested and not fully taking advantage of the maximum contribution levels available in their plans, the survey suggests. Generation-X, the age-group following the boomers that typically includes those born between 1965 and 1981, are faring somewhat better. But they also may fall short of their retirement financial goals. The good news for Gen-Xers, though, is that there’s more time to catch up.

Further dampening boomers’ financial prospects is the conservative approach to their asset allocation across their  investments, a lingering effect of the global financial crisis, the Legg Mason survey says. The asset allocation for boomers in the overall sample size of 900 respondents was 30% cash, 24% equities, 22% fixed income, 8% investment real estate, 4% nontraditional, 2% gold and precious metals and 8% in other investments (figures don’t add up to 100% due to rounding).

QS Investors, the Legg Mason affiliate that manages retirement products, says boomer investors should consider 50% or more of their DC plan’s allocation in equities, while even older boomers aged 65 to 74 should consider an equity allocation of more than 30% based on QS Investors’ allocation models.*

Those U.S. investors who participated in the survey have about 8.4 years’ worth of income held in their defined contribution plans. Investors also may have investments outside of a DC plan, as well as equity in their homes, real estate and annuities. Yet, the average level of savings in DC plans indicates that there’s hardly enough funds to cover longer lifespans.

Retirees are also not accomplishing their goals to live debt free or to maintain their pre-retirement standard of living. Only 42% said they’ve achieved their goal to be debt free, while 49% said they achieved their goal of having enough money to maintain their pre-retirement standard of living. Similarly, 50% said they achieved their goal of enjoying a good retirement income.

For the Gen-X age group, only 28% said that they do not have a DC plan. Those who do have an average of $199,000 saved and a goal of $541,000 in their plan by retirement. Similar to boomers, Legg Mason also noted the conservative asset allocation for Gen-Xers across their investments: 25% cash, 21% equities, 17% fixed income, 16% investment real estate, 11% nontraditional, 7% gold and precious metals and 4% in other investments (again, figures don’t add up to 100% due to rounding). QS Investors recommended an aggressive strategy of more than 80% of their asset allocation to equities.

Legg Mason said Gen-X and Millennials still have time on their side, but those who haven’t yet started preparing for retirement need to act soon to develop long-term investment plans and vow to stick with them if they expect a 40-year career to fund a 30-plus year retirement. That’s especially true, the survey found, for the more youthful Millennials, of which 75% want to retire early on a good income.

*Be sure to consult with a financial adviser and/or tax professional before implementing any strategy discussed herein.


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Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory Service offered through BCJ Capital Management. World Equity Group, Inc. and BCJ Capital Management are independently owned and operated. BCJ Capital Management is a (SEC) registered investment adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. BCJ FG 17-521

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