Marching Toward Retirement

Haven’t Saved Enough? Move to Harlingen, Texas

The Difficult Decisions Boomers Will Face to Close the Retirement Income Gap

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today released a new research report highlighting the difficult decisions confronting Baby Boomers as they march toward their retirement years with inadequate savings. Among the oftentimes unsavory options are postponing retirement, increasing savings, relying on help from family and/or assistance programs, and reducing expenses in retirement – possibly by downsizing or relocating to locales with lower costs of living.

With annual expenditures today exceeding $50,000 for the typical 65-year-old retiree, and Social Security generating only $16,000 in retirement income a year on average, many Boomers will need to rely on their savings to close this “income gap.” The issue is that four in 10 Boomers have no savings for retirement, and even among those with retirement savings, more than two-thirds have less than $250,000 saved.

“I’ll go out on a limb and venture that moving to Harlingen, Texas, which boasts the lowest cost of living in the country, is not a realistic option for most future retirees,” IRI President and CEO Cathy Weatherford said. “But many Boomers will have to make some tough decisions. The good news, as we show in our new paper, is that there are some things Boomers can do to boost their savings and reduce expenses. Then by constructing a strategy – using a combination of retirement income sources – they can have a plan in place to meet their retirement needs.”

Excerpts from Baby Boomers & Retirement Planning Strategy

  • Expenses In Retirement
    Often the retirement security challenge in the United States is framed in terms of how little Americans are saving, and how unprepared they are for the reality that steadily increasing lifespans mean retirement may last as long, or longer, than their time in the workforce. And this is certainly a valid, and important, lens to look through when gauging Americans’ retirement preparedness. But what does being under-saved and unprepared really mean in terms of the decisions many retirees and near-retirees will have to make?
    The Bureau of Labor Statistics (BLS) compiles annual survey data on consumer expenditures by age and category of expense. A comparison between average expenditures by retiree age group between 1984 and 2013 offers insight into the changes in expenses a Baby Boomer may expect to experience over the course of a 30-year retirement.
  • Income In Retirement
    I’ll go out on a limb and venture that moving to Harlingen, Texas, which boasts the lowest cost of living in the country, is not a realistic option for most future retirees

    In 2015 more than 42 million Americans were receiving Social Security retirement benefits, with an average monthly payment of $1,355, or $16,260 per year, and from 1984 to 2015 annual cost of living adjustments to Social Security retirement benefits averaged 2.79 percent annually.8 Assuming the same average increase extending into the future and overlaying Social Security on an expenditure graph, Social Security will eventually rise to almost $40,000 a year under these assumptions. This is the “income gap” that many Americans will face in retirement – an income gap that most will need to close using their retirement plans and personal savings.
  • Closing the Income Gap
    Fortunately there are steps Boomers can take to help close the income gap.
    Plan to delay retirement until age 70. This could produce multiple benefits including:
    – Social Security payments are 132 percent more than the payment received if benefits start at age 66.
    – Lifetime annuity income is less expensive. The $25,000 annual payment, increasing at 2 percent per year, used in the above example would cost $389,504 at age 70, or $71,728 less.14
    – Regardless of life span, there are five fewer years when savings are required to produce income and five more years to build up retirement savings.
    Increase contributions to retirement savings. Those age 50 and older can contribute up to an additional $6,000 per year to workplace retirement plans.15 Even assuming current contribution limits do not increase, if these “catch up” contributions are made from age 50 to 70 and realize an average 5.5% pre-tax investment return, they will add over $239,000 to retirement savings.
    Plan to retire, or move to, an area with lower expenses, particularly in expense categories that are meaningful given personal circumstances. The composite cost of living index for Harlingen, Texas, is 82.8, meaning it costs approximately 83 percent of the national average to live in Harlingen. By contract, the index for Manhattan, N.Y., is 216.7, or more than double the national average! If health care costs are a particular concern, the health cost index for Dothan, Alabama is 81.7, versus Fairbanks, Alaska, with the highest health care costs and an index value of 144.9.16
    Maintain the best health possible. While living healthy could mean a longer lifespan, it also could mean a lower consumption of medical care on an annual basis. Cessa- tion of unhealthy habits, such as smoking, and maintaining a healthy diet and regular exercise may lower the risk of needing chronic care, and therefore lower annual ex- penses for health care. A healthy lifestyle also may have the added benefit of providing a higher quality of life in retirement.

    The entire report, “Baby Boomers and Retirement Planning Strategy,” is available HERE.




About the Insured Retirement Institute
The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at