Baby Boomers turning 60 this year who plan to cash-in their retirement account can look forward to walking away with an average of $112,000, according to a report released by Boston-based Fidelity.
"The 401(k) will be a vital source of income for older Boomers," said Jack Callahan, president of Fidelity Institutional Retirement Services Co. And although 401(k) balances, combined with anticipated income from Social Security, pension and other savings among those between 50 and 59 years of age is at the highest of any group, they still have not saved enough, according to Callahan.
According to the Fidelity estimates, Baby Boomers are on track, on average, to replace about 60% of their working-years' income while in retirement. Fidelity recommends a minimum 85% replacement.
Sixty-one percent of older Boomers, compared with 41% of younger workers, expect some type of pension. Despite this expected income, 50% of older Boomers believe they will have to work in retirement to cover basic expenses, while 37% say they will need to work simply to pay their medical bills, according to Fidelity research.
There are more than 19 million working Americans who are eligible for a 401(k) plan who do not participate, according to Fidelity.
"Younger Boomers and Generation X need to face the reality that their retirement security will rely even more heavily on workplace and personal savings than those Boomers turning 60 now," said Callahan.
A 35-year-old earning $45,000 per year who contributes 10% annually to his or her 401(k) can have close to a half-million dollars saved by the time he or she is 60, according to Fidelity, assuming the employee receives a 3% employer match, annual raises of 3% and an annual market return of 7%.
Younger workers should also avail themselves to Individual Retirement Accounts and other savings vehicles.