Experts Say Baby Boomers Save Too Little

BOSTON —  Many baby boomers will face a nasty financial surprise when they retire because they’re saving too little and not investing wisely, financial experts said Monday.

“I think there’s a retirement crisis in America,” said Carter Beese, a commissioner with the Securities and Exchange Commission, at a conference on financial markets and the economy hosted by Boston College.

Social Security will be worth “little more than food stamps when the baby boomers retire,” he warned. Even now, many retirees have a hard time supporting themselves.

About a third of the elderly have no savings and depend on Social Security, said Karen Ferguson, executive director of the Pension Rights Center. The median income of people over 65 is just $10,200, she said.

One solution is to scrap the entire system, including Social Security, and allow people to make their own investments for the future, said Franco Modigliani, an economist from the Massachusetts Institute of Technology and a 1985 winner of the Nobel Prize in economics.

But many people fail to invest money wisely, said Peter Lynch, a mutual fund manager and vice chairman of Fidelity Investments Inc.

Some invest too conservatively in money market instruments or in the bond market, despite the fact that the stock market outperforms those investments, he said.

He said only half of employees’ tax-exempt savings for retirement under 401(k) plans are targeted toward stocks, below what he would advise clients.

Others, trying to increase returns on their money, are putting their savings in investments that prove riskier than they thought.

Still, the generation born after World War II has many economic advantages over their parents, said Robert Reischauer, director of the Congressional Budget Office.

Baby boomers have higher rates of income, thanks to more dual-income households and better education, he said. But they also are burdened by the nation’s fiscal crisis and rising health care costs.