A recent report by The Massachusetts Institute for a New Commonwealth (MassINC) and The Center for Retirement Researchat Boston College offers eye-opening research about the aging population in Massachusetts and its prospects for retirement. Massachusetts is aging and the baby-boomers, a large proportion of the Bay State's population, are approaching retirement. The report addresses the financial preparedness of the baby-boomers approaching their golden years.
The Aging Population
The American population is taking on a new form in light of life-expectancy on the rise and birth rates on the decline. We are living longer than previous generations and the post-retirement years are also becoming longer for many Americans, raising concerns about planning for an extended retirement.
The Bad News
Many near-retirees are unprepared to meet the financial burdens of retirement. The report predicts that Massachusetts workers will have to retire later in their lives to maintain current standards of living. Rising costs of medical care, lower savings rates, and cut-backs in Social Security benefits may force many workers to wait until their late sixties to retire. According to one MassINC survey, almost one quarter of families have no retirement savings. Personal savings rates dropped to two percent in 2001, the lowest rate since The Great Depression. The normal retirement age for determining Social Security payments is rising from 65 to 66 and then to 67, which means seniors will have to wait longer if they hope to receive full social security benefits. Pension income is usually insufficient. One quarter of workers eligible for pensions do not participate, and among those who do participate in pension programs, only ten percent contribute the maximum amount. One third of full-time employees in Massachusetts work for employers who don't offer pensions. All of these factors contribute to a vast shortage of retirement funds and large dependency on Social Security for retirement income.
Single women are particularly vulnerable to pre-retirement financial shortfalls. The near-retired population of Massachusetts women have worked fewer hours, for fewer years, and at lower salaries than their male counterparts. Women tend to live longer than men furthering straining their post-retirement resources. Twenty-eight percent of single women aged 65 or older are at or near the poverty level. Consequently, many single women may have to work well into their seventies.
The Good News
Bay State residents are generally better-prepared to meet the financial challenges of retirement. Massachusetts residents are generally healthier, wealthier, and more educated than residents of other states. Healthier retirees face lower healthcare costs. Massachusetts employees are less likely to work in physically rigorous jobs, allowing them to work later in their lives.
The report suggests there are ways to prepare for the oncoming retirement crunch: working longer and retiring later; increasing retirement savings programs in the workplace; increasing access to information on personal finances; more job training for older workers; and most importantly, a more thorough discussion among community members about planning for retirement.
For more information and a full copy of the report, The Graying of Massachusetts, click here.
Subscribe to the Knowledge Bank.
