Baby Boomers Short on Savings

About half the baby boomers in the U.S. aren’t saving enough to maintain their standard of living in retirement, and many low-income individuals will have to rely mainly on Social Security, according to a government report Tuesday.

The Congressional Budget Office’s review of 10 years of studies says most baby boomers who aren’t saving enough will see a “modest” drop in income that can be made up by working a few years longer.

The poorest quarter of baby boomers are most at risk, according to the report. The savings shortfall should prompt Congress to create more tax credits and accounts that encourage saving among all income groups, a seniors group said.

“We need to find a solution to the under-saving we’re seeing,” said Evelyn Morton, national coordinator on economic issues for the AARP, the nation’s largest lobbying group for seniors.

The report also contains encouraging signs about baby boomers’ retirements, and may fuel debate about President Bush’s proposal to allow seniors to invest a portion of their Social Security income in the stock market or set up private retirement savings accounts, said James Delaplane, a lobbyist for employers and trade associations at Washington-based law firm Davis & Harman.

Many of these proposals, which Democrats have criticized as too expensive and favoring the wealthy, will be resurrected by the Bush administration next year, he said.

Baby boomers -- the generation born from 1946 to 1964 -- are earning more than their parents at the same age and preparing for retirement at the same rate, the report said.

Congress should encourage firms to keep traditional pension programs, Delaplane said.

“There’s a continuing importance of having defined benefits plans as a viable part of the landscape,” he said.

Households with inadequate retirement savings will confront an average of 19 years of living expenses they can’t pay for, according to a 2000 study cited in the report.