Retirement: Plan, Don't Panic

Baby boomers are in a frenzy about their retirement. The oldest turn 62 in 2008, and everyone from their financial advisers to their mothers has told them they don't save enough. Politicians make it worse with dire warnings of Social Security's imminent demise. With time running out, many boomers worry that the scolds may be right and they won't have enough money to retire. Well, the boomers should stop fretting about eating cat food in their dotage. BusinessWeek's Retirement Guide shows they have amassed more wealth than their parents did at a comparable age, earn more real income, and save at roughly the same rate. They also have better prospects of working longer into retirement if they choose. Many will. Just how much golf can anyone play?

As for Social Security, it isn't going broke anytime soon. The Congressional Budget Office says the Social Security Trust Fund will hit empty in 2052. But that is based on low estimates of productivity and economic growth. If current levels are sustained, Social Security probably won't run out.

Boomers should fret about Medicare. The gap between promised benefits and dedicated payroll taxes runs into the tens of trillions of dollars. Some judicious means-testing is needed to make Medicare function as a smaller, but real, safety net. Even so, there is no reason for boomers to live in fear at the prospect of an impecunious old age. When it comes to retirement, a little planning goes a long way.

    Before it's here, it's on the Bloomberg Terminal.