Cover:How Much Is Enough, Anyway?

According to the Employee Benefit Research Institute’s (EBRI’s) Retirement Security Projection Model (RSPM), 44% of Baby Boomers and Generation Xers are still projected to be “at risk” of running short of money in retirement. The analysis estimates the aggregate national retirement income deficit—taking into account current Social Security benefits and the assumption that net housing equity is utilized “as needed”—to be $4.3 trillion for all Baby Boomers and Gen Xers. 

The trick is helping people figure out, wherever they are, how to create a plan that works, according to Scott. For example, he says, a person of 65 or 66 making $50,000 a year who has saved $100,000 and is thinking about retiring can work one more year and have half of accumulated savings put toward retirement. Similarly, the difference between following a standard strategy of taking Social Security immediately when turning 62 and of waiting for the bigger benefit when age 65 or older can increase retirement income. In addition, working part time and reducing expenses in retirement can help fill the gaps.

Workers should think about how they might boost savings by working longer, and therefore saving more, or being savvier about other benefits, such as claiming Social Security at a later age, Scott says.

A brief from the Center for Retirement Research (CRR) at Boston College concludes that starting early to save for retirement and working longer are more effective levers for ensuring retirement security than earning a higher return on savings. “How Much to Save for a Secure Retirement” said this strategy of saving longer is especially effective, given the greater risk that comes from chasing investment returns.

Also, the further along an individual is in his career, the more effective it is to work a few years more. Because Social Security benefits are actuarially adjusted, they are more than 75% higher when he is age 70 than age 62. As a result, they replace a much larger share of preretirement earnings if workers wait to apply—29% if they are 62 and 52% if 70, in the CRR’s example—reducing the amount they would need to take from savings­. And, by postponing retirement, people have additional years to contribute to their 401(k) and allow their balances to grow. Finally, a later retirement age means that people will have fewer years of dependence on their accumulated retirement assets.