Boomers, Don't Panic On Your Retirement

BABY boomers have heard much gloomy talk about their retirement prospects. Their hopes of getting proper Social Security payments are dim, doomsayers allege. A Merrill Lynch & Co. study released last month found that boomers are saving at a rate of only 35.9 percent of the amount they need to maintain a consistent standard of living upon retirement.

However, a recent study done by the Employee Benefit Research Institute in Washington puts some perspective on the issue. ``We are cautioning people not to take such a negative view,'' says Carolyn Pemberton, an EBRI official.

It will be 17 years before the first of the 76 million boomers reach retirement age. A lot can happen in those years to better or worsen their financial situation. Key factors include trends in economic growth, productivity, housing values, health-care costs, and participation rates in private or public pension plans, plus changes in Social Security benefits and taxes to pay for them.

These are impossible to predict, Ms. Pemberton notes.

However, at the moment, the EBRI sees this situation:

* Boomers, in general, will enjoy a standard of living (a real level of consumption) in retirement that exceeds that of their parents. However, it is not clear whether they will be able to maintain the standard of living they enjoyed while working. Boomers may consider their retirement income inadequate if it is below what they have become accustomed to.

At present, this generation is doing considerably better economically on average than their parents at similar points in their lives. A possible exception is the poorest segment of the youngest boomers. A Congressional Budget Office study reckoned that this relative prosperity of boomers has much to do with the greater likelihood that they will remain single longer, have fewer children, and combine mothers' marketplace work with child-raising.

An important element will be played by wealth accumulation through home ownership. Will house prices go up as much as in the past? Will retired boomers draw on that house value through reverse mortgages or in other ways to fund their retirement?

* The data do not support the popular perception that baby boomers' savings rates are much lower than those of previous generations. But different studies reach different conclusions as to whether boomers' savings will be adequate. The Merrill Lynch study does not include housing wealth. If housing is taken into account, then boomers are saving at 84 percent of the rate necessary to maintain their level of consumption on retirement.

* Despite talk of boomers having to jump from job to job and not building adequate pension benefits, their tenure at their present jobs is generally longer than that of previous generations of workers at the same ages. The data do not show whether boomers shifting jobs are doing so voluntarily (for a better job) or involuntarily (laid off) more than their elders.

``Perceptions held today regarding paternalistic employers, lifetime employment, and limited job mobility among previous generations of workers often exaggerate reality,'' the study says.

* In 1993, 47 percent of all civilian nonagricultural workers participated in an employment-based retirement plan, up from 46 percent in 1988 and down from 50 percent in 1979.

Paul Yakoboski, chief author of the EBRI report, emphasizes that sweeping generalizations do not cover everyone among the diverse boomers. Many boomers may need to save more.