The average baby boomer will fall far short on their necessary retirement income.

About 44% short.

Thats the grim prediction in a new study by Fidelity Investments which looked at average amounts saved, projected Social Security benefits, home equity and other factors across three demographic groups: baby boomers, Gen-Xers, and Generation Y (aka echo boomers).

Like the massive RETIRE Project Georgia State University conducted for decades, the Fidelity study assumes that because some expenses decline once you retire, you dont need as much income to maintain your standard of living.

But thats about where the similarity ends.

While the GSU study(1) estimates that an individual earning $50,000 to $90,000 per year needs to replace 80% of that amount the first year of retirement in order to maintain their standard of living, this amount includes the taxes youll still have to pay on some of your income/ On the other hand, the Fidelity study also assumes youll need 80% of your pre-retirement income, but on an after-tax basis.(2) As a result, the before-tax income you will need will actually be 25% higher than the monthly amount cited.

Numbers Dont Lie. Humans Do

Another potential flaw in the Fidelity Retirement Savings Assessment study is that it relied on self-reported data, which can be less than accurate compared to independent sources for income and account balances. For instance, the average Gen-X worker was found to have a median age of 37 and a current income of $72,000 before taxes. The average baby boomer- age 55- reported annual earnings of $74,000- just $2,000 a year higher. It seems a bit improbable that a 55 year old would only have a $2,000 income edge over someone 20 years younger.

Finally, while the survey included roughly 3,000 individuals ages 25 to 85, it was conducted entirely online, which naturally eliminates individuals who do not have access to a computer or wish to take the time to fill out an extensive survey.

The Shocking Shortfall

More:
Scary Retirement Numbers--No Matter How You Calculate Them