Some estimates place Social Security is the main source of non-earned income for seven out of 10 middle-income workers. Unfortunately, boomers are due to tap a program that is under attack politically and already beginning to show signs of shortfalls and strain.
Outlays are expected to exceed tax revenues as early as 2016, according to the Congressional Budget Office. Social Security's actuaries predict that the program will have exhausted its reserves and will only be able to pay 77% of promised benefits by 2036.
Americans don't seem to be prepared for that prospect. A new survey of more than 2,000 adults by State Farm shows that slightly more than six in 10 Americans say they will not be able to retire without Social Security as it exists today. Nearly one-quarter doubt they'll ever be able to retire.
And most people don't have a much of a rainy-day fund to tide them over a crisis, the insurer's survey showed. Should they be hit with an illness, death, job loss or divorce, 61% said they would take money from a 401(k) or other retirement plan; 34% would try to downsize and 22% would move in with family.
For the boomers, who are on the cusp of retirement, the situation is even more acute.
Nearly one in 10 boomers expects to support an elderly parent financially at some point, according to a study of 500 middle-income pre-retirees by Bankers Life and Casualty Company Center for a Secure Retirement. But boomers got kicked hard during the recession and many have not been able to recover. So now, six out of 10 boomers admit that they are envious of their parents' pensions and guaranteed income, according to the study.
While the burden of paying for retirement has shifted from employers to individuals, only a slightly more than half of those Bankers Life surveyed work for an employer that offers a retirement savings plan. One in four of those who did work for an employer with a retirement plan did not get matching contributions. Since the recession hit in 2008, some 20% said that their employers reduced matching contributions while 68% saw a decline in their retirement accounts. One in seven has no retirement account at all.
The takeaway: Spend less and save more; particularly, maximize your contribution to your employer's 401(k). If your employer doesn't have one, visit the Internal Revenue Service's web site to see if it makes sense for you to save for retirement in a tax-advantaged IRA or Roth account. If you are not working, but your spouse has taxable compensation and you file jointly, you may still be able to contribute to a traditional or Roth IRA if you meet income and other limitations.