Nanci Pipo, a partner at investment advisory Southtowns Financial, finds herself answering a lot of questions about retirement planning these days. There's one group of people in particular who seem to be most in need of counsel from this small, Orchard Park, N.Y.-based firm just south of Buffalo.
"Folks who have just turned 50, or about to turn 50, they are the ones who are really starting to feel stressed out," Pipo said. "They are looking at their 401(k) nest eggs and other retirement savings accounts and realizing that it's simply not enough."
Pipo is referring to a sub-segment of the American population sometimes called the "Late Boomers."
They are, in some ways, a generation betwixt and between, too young to attend Woodstock, too old to be slackers. However, these late boomers, born in the late 1950s and early 1960s, may have the worst possible timing when it comes to retirement planning.
According to a recent study from the Center for Retirement Research at Boston College, 48 percent of late boomers are at risk of being unprepared for retirement, or, put another way, of being unable to maintain their current standard of living after they stop working. That compares to 41 percent of "Early Boomers," the first wave of the boomers born in the late 1940s and early 1950s.
Members of the so-called Generation X, who were born between the mid-1960s and early 1970s, are seen as being even less prepared for retirement than late boomers. Some 56 percent of Gen-X members are thought to be insufficiently prepared for retirement, according to the study. However, this segment of the workforce has more time to catch up to the late boomers, according to the study's coauthor, CRR director Alicia Munnell.
"Late boomers did not benefit as much from the main bull market (1982-2000) as did the early boomers," Munnell explained. "But they got hit just as hard in the recent financial crisis."
Moreover, she said, late boomers are running out of time.
After the 2008 financial crash unfurled, a significant amount of attention was paid to the plight of just-retired or soon-to-retire baby boomers in general. But the extra-precarious plight of late boomers, relative to early boomer counterparts, was, in Munnell's view, underappreciated.
Lower Annuity Rates
"As jarring as the financial collapse may have been for the early boomers, the market has actually treated them well over their lifetime," she said.
The late boomers are the most vulnerable, Munnell said, because "they would need substantial returns in the future to end up with the same ratio of assets to income at age 60 currently enjoyed by early boomers."
Stock declines, lower annuity rates, housing price declines and longer life expectancies all factor into late boomer retirement shortfalls.
So what's a panic-stricken late boomer to do?
The most important thing to remember is that there are levers still yet to be pulled, said John Sweeney, executive vice president, planning and advisory services at Boston-based mutual fund giant Fidelity Investments.
"As workers get older there are catch-up provisions that allow you to put more money away tax free," Sweeney said. "And of course social security is also going to play a role. But contributing the maximum to retirement accounts is most crucial."
David Wray, president of the Chicago-based Profit Sharing/401k Council of America, reminds people that it's never too late to start taking advantage of 401(k) plans.
"The typical person, regardless of age, has about $44,000 in their 401(k)," Wray explained. "Doesn't seem like much, but remember it's a savings and investment plan."
A major driver of retirement savings is the employer match, he said. But a number of variables come into play.
Wray likes to use an illustrative calculation -- a hypothetical worker who is 50 years old and who makes $50,000 a year.
"If that person puts 8 percent a year into their 401(k) and their employer puts in 3 percent, and assuming an 8 percent market return, and assuming the person can work until they are 67, that person will have $400,000 by the time they retire," Wray said. "Factor in social security and perhaps a $33,000 per year annuity for that $400,000 and the person will be receiving around $66,000 a year when they turn 67."
Safer Investment Alternatives
For investors who have lost confidence that the stock market can produce any positive returns let alone an annualized average return of 8 percent, there are options.
Various investment products have specifically been designed for the ultra cautious or faint of heart.
Howard Present, CEO of Wellesley, Mass.-based based F-Squared Investments, said that he doesn't buy into "buy and hold" axiom, and believes that most individual investors are wrongly conditioned to just set their money in a low-cost mutual fund and leave it there no matter what happens.
"The main concept to remember, especially as you near retirement age, is the importance of defending your core holdings," Present stressed. "You want to participate on the upside while avoiding major down swings."
F-Squared's two main portfolios mix and match nine sector-specific Exchange Traded Funds, or ETFs, paring back on sectors that seem overheated. One of F-Squared's portfolios only lost 9 percent during the crash of 2008, while the other lost 2 percent. That same year the S&P 500 lost 37 percent.
"The idea is not to chase returns," Present said. "Instead, just be disciplined about avoiding big losses." "
Added Wray: "It's never too late to start building your nest egg, even if you just turned 50."
So take a deep breath late boomers. There's more time than you think.