THE OLDEST baby boomers turn 56 this year, and for this age-defiant generation that means retirement is no longer far off.
Some money experts say boomers, those born between 1946 and 1964, will enjoy a financially better retirement than today's retirees. Others, noting surveys of dismal savings among boomers, are less optimistic. But one thing they do agree on: Boomers' retirement won't be their parents' retirement.
"They redefined everything. It's safe to say they will redefine retirement, too," said Clare Hushbeck, a labor economist with AARP in Washington.
As retirees, boomers are expected to live longer and be more active than their parents. And unlike the previous generation that often relies on pensions and increasing Social Security benefits, boomers will find their retirement income largely determined by workplace plans under their control and their personal savings and investments.
Boomers, and even those younger, have been hit on the head with warnings that their retirement fate is up to them rather than an employer or the government. Even so, many boomers have vague ideas of how much they will need for retirement and how to reach that goal, experts say.
Even worse, many hold misperceptions about retirement that could backfire on them, experts said. Here are common mistakes:
Overestimating investment returns.
"They are unduly influenced by what happened in the late 1990s," when 20 percent-plus returns were a regular occurrence in the stock market, said Marvin Burt, a Rockville financial planner.
The past two years of negative market returns have been sobering, but not enough to bring expectations back to reality, he said. "Instead of assuming they are going to get 20 to 25 percent, investors now may be thinking of getting 15 percent ... which is still absurdly high," Burt said.
The historical return for the stock market is about 10 percent to 12 percent. But as investors near retirement, they tend to adopt a more diversified, conservative portfolio, adding cash and bonds with even lower returns. When creating a retirement plan, Burt figures a 6 percent to 8 percent return.
Overwithdrawing.
Inflated expectations about returns can lead to overblown withdrawals that can empty a nest egg quickly, said Barry Glassman, a financial planner in McLean, Va.
Boomers may figure they will earn 10 percent a year on their portfolio, and, therefore, will be able to withdraw 7 percent annually in retirement, he said. "It works great if you always earn 10," he said.
