Retirement savings rebound, but planning is still key
On the plus side, a new study shows, Americans' retirement savings has rebounded from the depths of the Great Recession.
Nearly 60 percent of workers say they have somewhat or fully recovered from the 2007-09 downturn and median savings has risen substantially.
Even so, unless they're holding sizable nest eggs under the proverbial mattress, they still have a long way to go to replace their income in retirement.
Forty-two percent of baby boomers, the youngest of whom turn 50 this year, for example, have less than $100,000 in retirement accounts, according to the Transamerica Center for Retirement Studies annual survey.
Among Generation X savers, born between 1965 and 1978, more than half have less than $100,000 saved.
Millennials, born after 1978 and before 1997, were somewhat of a bright spot. Just 20 percent have amassed more than $100,000, but they benefited most from the post-2007 stock market recovery. Median savings for the group — $32,000 — rose nearly fourfold from 2007 to 2014.
These young adults seem to be saving more in addition to simply having benefited from the market rally, said Catherine Collinson, president of the Transamerica Center for Retirement Studies.
"They're seeing firsthand what's happening to [the abruptly stunted careers of] their baby boomer parents and getting the message that it's important to start saving early," Collinson said.
For their part, Boomers reported median savings of $127,000, up from $75,000 in 2007. Gen Xers reported median savings of $70,000, up from $32,000 in 2007.
At the top of the range (among those who reported figures), 42 percent of Boomers, 24 percent of Gen Xers and 9 percent of millennials had retirement accounts of more than $250,000.
It's important to note a significant caveat in the data. The survey asked how much people hold in all of their retirement accounts, but didn't ask about other assets, such as home equity, taxable accounts, monthly pensions or small businesses.
Still, the numbers justify other findings in the survey that show many people expect to work in some capacity after their longtime careers are finished.
"Those who make a plan and act on it end up with more assets in retirement than those who don't," said Carrie Schwab-Pomerantz, author of the recently released "The Charles Schwab Guide to Finances After 50." She's the daughter of the discount brokerage founder and an executive with the firm.
In the book, written in Q&A format, she discusses a variety of post-50 financial issues, from dealing with boomerang adult children to deciding when to file for Social Security benefits.
For those whose retirement accounts are on the slim side, Schwab-Pomerantz suggests beginning to build an emergency cash cushion — invested very conservatively and with no stocks — five years before your planned retirement. So if you previously held a six-month emergency reserve, double that to a year, she said.
And think hard before paying off a mortgage ahead of retirement if it will leave you with a very small nest egg, she said.
"There's a perception that you need to eliminate all debt when you retire, but if you have $500,000 in assets and a $150,000 mortgage, it's not necessarily an automatic call."
Even affluent clients are getting surprised by earlier-than-planned retirements and higher medical costs, said Kathy Longo, president and founder of Flourish Wealth Management in Edina, Minn.
"Some are forced to live on a different budget than they originally thought, so a lot of what we do is just getting into detailed cash flow," she said. "For some clients, a third of their budget is medical expenses, and they can't go back to work because they're caring for a spouse, so we know we'll have to cut way back on spending later."