Managing Your Money : Baby Boomers Are Unprepared for Retirement : At this rate, many will be lucky if they can ever stop working. Yet there’s hope.

It seems a paradox. Baby boomers are the most affluent generation in American history. Yet they are also woefully unprepared for the years ahead.

For many, two questions will loom increasingly large: Will they ever be able to retire? And if so, when?

“Baby boomers who have sat down and done their financial planning realize that they may have to retire at 76 instead of 65, and that they will have to accept a lower standard of living than they imagined,” says Karen Meredith, executive director of the American Assn. of Boomers, a nonprofit organization in Irving, Tex., that promotes financial planning among its 20,000 members.

Baby boomers have delayed savings just as they have delayed everything else, and lack of thrift is a major cause of their predicament. A generation that grew up on credit cards has spent its way into a difficult position.

The boomers made choices that haven’t always helped. By postponing childbearing, for example, many will find themselves paying for college and retirement simultaneously.

But all is not hopeless. Experts agree that even boomers who are late bloomers when it comes to savings can structure a comfortable retirement. The key is not so much to go on a crash financial diet as it is to make regular and consistent contributions toward a retirement program.

There are 76 million Americans who were born between 1946 and 1964, about 46% of all adults and the largest segment of the population. The oldest baby boomers are now closer to retirement than to Woodstock.

But for many between ages 27 and 45, retirement may be as dated as free love and flower children. The sad fact is that unless they mend their spendthrift ways, baby boomers are shaping up as the generation that can’t afford to call it quits.

One reason for this bleak prophecy is that baby boomers have had the bad luck to live at a particularly disadvantageous time in our economic history.

Unlike their parents, who came of age during the Depression and World War II and then rode the greatest economic boom ever seen, baby boomers grew up in comparative affluence during an age of inflation.

The results can be surprising. Todd Cooper, for example, is by most measures a success. The 47-year-old Whittier plastics salesman out-earns his father, but he and his wife fret that they will never have enough to retire.

“It’s a matter of hitting the jackpot or living off Social Security,” he says, sighing. “My father was a postmaster for 30 years and retired at 55. He’s got a damn good pension.”

Indeed, the generation born between 1929 and 1938--the parents of baby boomers--achieved unusual financial success that is unlikely to be matched by their children, says Frank Levy, an economist at the University of Maryland’s School of Public Affairs in College Park, Md.

According to an Urban Institute study co-authored by Levy, baby boomers will reach retirement age with less than half the real net worth of their parents at a similar age. He estimates that baby boomers will begin retiring in 2013 with an average net worth of $143,000, compared to an average of $293,000 for their parents today.

“The parents grew up with low expectations,” Levy says. “Then their income went up like crazy. And they were cautious about saving. Adults today in their mid-30s and 40s entered the labor market at a very sluggish time. Savings is one of the first things to go.”

The U.S. personal savings rate has shrunk to an average of 4.1% today from 8.7% in the early 1970s, according to the Commerce Department. Forecasters at DRI/McGraw Hill in Boston expect personal savings to hover just above 4% for the rest of the decade. A recent Merrill Lynch survey found that families headed by 45- to 54-year-olds had life savings of only $2,300.

Michael A. Rosenblatt, a 35-year old Agoura Hills financial planner, acknowledges that he got a late start on saving for retirement.

Married and with three children between ages 1 and 6, he has about $20,000 in an individual retirement account that he rolled over from his previous employer’s 401(k) plan. It would have been more if he hadn’t used some of it to start his own business.

Instead, Rosenblatt says he has cut back on going to the movies, buys fewer clothes, and is “keeping the car longer. . . . I’m trying to practice what I preach.”

Still, Rosenblatt concedes that “educating my kids,” not saving for retirement, is his chief priority now. He figures that he won’t be able to start making major contributions to his IRA again until his business is fully up and running--perhaps another year. When that happens, he estimates with optimism that he might be able to put aside $30,000 a year over 10 years, which, with a decent return, he believes will make a satisfactory nest egg.

Baby boomers might be shocked to find what it takes. Just to have an income of $12,000 a year for 20 years commencing in 2021, a 35-year-old would have to save $7,099 annually, assuming a 5% annual inflation rate and a steady 8% return on all savings and investments.

And $12,000 a year is unlikely to cover basic necessities, so baby boomers in the next century will actually need at least two or three times that to maintain even a modest retirement income.

But don’t expect Social Security to provide it. The Treasury Department estimates that Social Security will only account for 20% of retirement income, while savings and investments account for 39% and part-time earnings another 23%.

That doesn’t surprise Marjorie Allison, a Denver-based sales consultant, who has always assumed that she is unlikely to see her Social Security contributions. Allison, 34, considers herself typical of her generation: She has worked for six different companies over the last 12 years, always trading up for a better job. She never stayed with one employer long enough to become fully vested in a pension plan.

She hasn’t put much aside for retirement, either, and doesn’t know many friends who have.

Demographers say people such as Allison are more common among baby boomers than in their parents’ generation, whose members tended to stay with the same job or company throughout their working life.

That earlier generation also saw the value of their homes skyrocket in the post-World War II period, which significantly boosts their net worth in retirement.

How much income, then, do baby boomers need to retire? George Lippert, a Calabassas CPA and financial adviser, says boomers ought to reasonably expect 50% of their current income, not including Social Security. Social Security, he adds, might account for another 20%.

Fortunately, retirement for yuppies is not hopeless. Lippert advises that even people who start late can structure an adequate retirement income. It just takes sacrifice. Self-employed people can enroll in a Self-Employed Persons IRA or Keough plan, which allows them to put aside anywhere from 15% to 25% of their net profit up to $30,000 a year.

Additionally, baby boomers can buy an annuity from an insurance or investment company. An annuity is a guaranteed deferred payment plan. Unlike traditional savings accounts, however, the return on investment is not taxed until it’s paid out. And there are no limits on how much you can pay in--so the more you set aside, the higher your income later.

People working at companies with 401(k) plans should sign up immediately upon eligibility. Husbands and wives should even open separate IRA accounts and contribute the maximum $2,000 annually. Although IRA contributions are no longer tax deductable for such workers, the interest income is still tax deferred.

In all cases, however, Lippert urges that baby boomers maximize their contributions to make up for time they lost when they spent their extra money instead of saving it. “If you get into these plans, you don’t miss it in the long run. But if you don’t get into these plans, you spend it. That’s the baby-boom generation to a T.”

For some baby boomers, later retirement may hold no terrors. This is a generation more concerned with fitness than any other, after all, and likelier to live longer. Its members are also far likelier to work in a comfortable office than a coal mine.