6 ways to avoid the baby boomer retirement bust

Baby boomers and retirement. They thought that day would never come - and unfortunately, many of them saved money as if it never would. If you are in that situation, there is still time to improve your retirement savings - but only if you start getting serious about it now.

Low savings rates come home to roost

In the past, people typically accumulated wealth as they grew older, but not so with baby boomers. Here are some statistics that tell the story of the spendthrift habits of this generation:

• Low savings rates. Why don't baby boomers have enough money for retirement? According to the Bureau of Economic Analysis, personal savings rates have been declining steadily: from 9.59 percent in the 1970s to 8.60 percent in the 1980s, to 5.49 percent in the 1990s, to 3.19 percent in the 2000s.
• Accelerating bankruptcy rates. Americans appear to be getting poorer, not richer, as they get older. According to a study by the Administrative Office of U.S. Courts, the average age of personal bankruptcy filers is increasing, and Americans 45 and older represent the fastest-growing age group for bankruptcies.
• Grim retirement outlook. The most recent Retirement Confidence Survey by the Employee Benefit Research Institute found that 70 percent of American workers are behind on their retirement planning and saving, and only 13 percent say they are very confident of having a comfortable retirement.

As if these poor savings habits weren't enough, retirement nest eggs have been battered further by over a decade of weak stock returns, and by low interest rates on savings accounts which diminish the earning power of savings.

6 ways to improve your retirement outlook

With the first baby boomers now reaching retirement age, the problem of low retirement savings takes on an added sense of urgency. If you find yourself gaining weight and grey hairs faster than you are accumulating wealth, here are six things you can try to avoid the baby boomer retirement bust:

1. Work longer. Prolonging your career has a doubly-beneficial effect: it not only gives you some extra saving years, but it also reduces the number of years you'll be living off your savings in retirement. In any case, viewing age 65 as retirement age may be an outdated notion. According to the Centers for Disease Control, in 1950 the average person reaching the age of 65 could expect to live another 13.9 years. Since then, the life expectancy for 65-year-olds has risen to 18.6 years. If people have added about five years to their life spans, it would make sense to add a similar amount to their careers.
2. Diversify your investments. The past decade has seen boom-and-bust cycles in such investments as tech stocks, real estate, and oil, with disastrous effects for people who chased those booms. Don't risk your savings by trying to get rich quickly; diversify your investments to manage risk. Even conservative vehicles like bank accounts may need to be diversified to make sure you don't exceed Federal Deposit Insurance Corporation (FDIC) insurance limits.
3. Use laddering to manage interest rate risk. Today's low interest rate environment has created a dilemma for savers: Do you accept relatively low savings account rates or money market rates, or do you reach for higher CD rates by locking your money in for a few years? You can hedge this dilemma by laddering CDs - deposit money in CDs with different maturity dates, so you can capture some of the highest rates available today in longer-term CDs, while still having some money becoming available on a regular basis to take advantage if a rise in rates occurs.
4. Save on bank fees. Though more and more banks are instituting checking account fees, free checking does still exist. Shop around for free checking, and also avoid overdraft fees by opting out of overdraft protection programs.
5. Shop actively for savings account rates. Though average savings and money market rates are down around 0.20 percent, you can find savings account rates and money market rates that are four or five times the national average. Once you find a good rate, keep an eye on the market and be prepared to switch if a better opportunity arises.
6. Monitor progress towards your goals. Retirement savings may be a long-term program, but you can't just put it on auto-pilot. Set goals, monitor progress towards those goals regularly, and make adjustments accordingly.

Collectively, the baby boom generation has done a terrible job of saving for retirement. However, individuality is at the core of this generation's ethos, so you can go your own way by taking a more active - and effective - approach to building your retirement savings accounts.

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