Many Gen X & Boomer Women Struggling to Save for Retirement

Recent economic challenges are taking their toll on Baby Boomer and Generation X women, according to a report from the Insured Retirement Institute (IRI). Among the Gen X women who were surveyed, 35% find it more difficult to pay the mortgage or rent (21% for Boomers), 13% have taken early distributions from a 401(k) or IRA (9% for Boomers), 19% stopped contributing to their 401(k) or IRA (17% for Boomers), and 16% delayed plans to retire (25% for Boomers). For those not certain about when they will retire, current or anticipated savings shortfalls is the primary factor. Two-thirds (65%) of Boomer women have weak or no confidence in having enough money to live comfortably in retirement.  It's even higher for Gen X (78%). The challenge becomes even greater when you factor in the longer life expectancy of women. The IRI suggests that use of a financial advisor produces better retirement savings outcomes, but 77% of Gen X and 55% of Baby Boomers have not sought out this financial support.  For those who don't use a financial advisor, insufficient savings is the primary reason.

While the use of a financial advisor may very well produce positive results, I think we have a case of which comes first, the savings or the use of a financial advisor? For those who are struggling, I think most will say that the savings comes first, regardless of whether or not it should. To encourage improved retirement savings, I believe we need to take a page from Apple's "think different" approach. What if the Tax Code were amended to allow early distributions to be taken without penalty for financial hardship, but including incentives to encourage timely repayment. Knowing that the money would be available for financial emergencies would encourage more money to be put in the 401(k) or IRA in the first place. I outlined the concept in a recent blog post; here is a quick chart I put together describing the concept.