The Boomer generation has been one of preparation…we grew up with books and tapes and DVDs on how to do just about everything, from how to take the SAT tests to how to diaper our first child. While this same demographic is getting ready to stop working and begin a life in retirement, most think they know what this next chapter of life will bring and don’t seek advice. It turns out that we are way off the mark when it comes to being aware of longevity and how much money we will need in retirement.
According to findings in the 2011 Met Life Retirement Income IQ, most Boomers have a lot to learn about what a financially secure retirement really means. Of the more than 1000 pre-retirees (ages 56-65) surveyed, the majority answered only one third of the questions correctly, meaning there are misunderstandings in area such as life expectancy, inflation and even social security.
Respondents generally underestimated what they need to cover housing, food, health care, transportation and insurance and taxes. According to Sandra Timmerman, director of the MetLife Mature Market Institute, “Everyone knows they are likely to live longer, but most don’t realize that can mean living past age 85 and how to calculate what they will need to a steady and lasting income. Too many people overestimate how much of their savings they can safely withdraw each year.”
Some of the major findings from the study are:
•Despite years of public education on long term care costs, 42% of us still believe incorrectly that Medicare and health insurance will cover all the costs of long term care.
• As options for retirement income have expanded, more attention is being given to products specific to retirees, but there is a general lack of knowledge about them.
•Only 17% knew that delaying the collection of Social Security by three years would add 24% to their monthly benefit amount.
•Only one-quarter (24%) correctly identified that a reverse mortgage is accessible only to homeowners age 62 or older, and over half (54%) were unaware that a reverse mortgage can be used to purchase a primary home.
•Almost half (48%) say that because of market uncertainty, they are more conservative with their investments. Another 30% say that they lost a considerable amount of money in the past few years.
The 2011 MetLife Retirement Income IQ included questions about retirement security and planning. Participants were those working full time and within five years of retirement. How would you score on the test?