Insights from Boomers Prepared for Retirement

An Investor Index Survey released by TD Ameritrade conducted among both nonretired and semi- or fully-retired Baby Boomers unveiled key characteristics and behavioral differences among respondents who consider themselves financially prepared for retirement and those who reported they are financially unprepared for retirement.   

More than half (54%) of Prepared Boomers reported that when times are good financially, they remain conservative with their money, compared with just 35% of Unprepared Boomers who reported the same. Similarly, 41% of Unprepared Boomers admitted they are more carefree with their money when times are good, compared to just 30% of Prepared Boomers. When asked if they tend to be patient and plan things carefully, 53% of Prepared Boomers agreed, compared to 38% of Unprepared Boomers.   

Overall, Prepared Boomers seemed to make better financial choices than those Boomers who did not successfully prepare for retirement. They started saving significantly earlier than Unprepared Boomers (median age 30 versus 35). They are also significantly more likely to save for retirement by having money automatically deducted from their pay than those who are Unprepared (74% versus 54%).

(Cont’d…)

Prepared Boomers were slightly more likely to have family who could help fund college expenses or a new home compared to Unprepared Boomers. Unprepared Boomers also reported having greater than average health care expenses. In addition, Boomers who grew up in households where parents talked about money management and saving for retirement are significantly more likely to be Prepared (42%) than Unprepared (29%).   

Top Factors Affecting Retirement Preparedness 

When Prepared Boomers were asked what has allowed them to stay on track and successfully save for retirement, their top three unprompted responses were personal actions they have taken:

• Budgeting and regular saving (37%);
• Participation in a company retirement plan, such as a 401(k) (20%); and  
• Controlling their spending and incurring little or no debt (20%). 

Conversely, Unprepared Boomers cited external factors as the top three reasons they are not on track for retirement:  

• Loss of or poor employment (35%);
• High costs of living and a poor economy (33%); and  
• Above-average health care expenses (12%).

However, many Unprepared Boomers still blame themselves for falling behind. More than half (53%) of Unprepared Boomers said they agree that their own actions are to blame rather than outside factors like the economy. Forty-seven percent of this group said they were not on track with respect to saving for retirement even before the economic downturn in 2008.