This year marks the beginning of retirement for baby boomers and while the idea of leaving the work force for retirement sounds gleeful, there’s a major problem: We don’t have the money, and neither do they.

According to the U.S. Census Bureau, there are more than 77 million boomers in the U.S. and by 2030, this demographic (born between 1946 and 1964) will represent an estimated 20% of the population. This means more than 10,000 baby boomers will turn 65 every day for the next 19 years. 

“The financial reality for most the baby boomer population is that funding retirement will be much more difficult than they anticipated,” says David Zuckerman, principal and chief investment officer at Zuckerman Capital Management. “The modern concept of an extended retirement is relatively new.”

Monthly Social Security payments will provide some income, but without other investments, it may be nearly impossible to exist on that alone.

“Social Security was never designed to cover the cost of living for such a long period,” Zuckerman says.  “When Social Security was designed, life expectancies were such that the system was meant to provide extra income in just the last few years of life.”

The retirement picture has changed dramatically since boomers saw their parents enter their golden years. The elderly are living longer and the cost of health care is rising dramatically, making it very expensive to retire.

Contributors to the Crisis

Pensions, a fixed amount of money paid by former employers post worklife, are falling by the wayside because companies don’t want the risk associated with funding the plans.

“Historically, this risk was primarily due to fluctuating returns as companies are required to make additional contributions to offset any underperformance in pension plan portfolios,” Zuckerman says. “These traditional risks have now been greatly amplified by the longer life expectancies of retirees, which require companies with pensions to make much larger annual contributions to meet their extended obligations.”

Jeff Rose, certified financial planner and author of the blog “Good Financial Cents”, says that the decrease in pension plans fueled the rise of  401(k) plans.

“Instead of the corporation being responsible, they’re now making the employee responsible,” he says.

But experts say baby boomers didn’t contribute enough to their 401(k) plans and many of them saw what savings they did have take a dramatic hit during the economic crisis. On top of that, many boomers “borrowed” from their 401(k) plans, paying both penalties and taxes on the money instead of leaving it alone for the purpose of retirement.

Zuckerman also points out that baby boomers relied too heavily on the equity in their homes to help fund retirement, which has left them picking up the pieces after the housing market crashed.

“Many baby boomers were led to believe home prices would more or less double every decade, a belief that led many baby boomers to neglect retirement savings,” says Zuckerman. “Now that the real estate and credit bubbles have burst, many people are realizing that rates of return on single family homes do eventually revert to long term averages.  Many baby boomers are now aware that their home equity will not fund their retirement.”

Jane White, president of Retirement Solutions and author of “America: Welcome to the Poorhouse,” explains that many boomers will still have mortgages and home equity loans when they’re ready to retire--something past generations didn’t have to worry about.

“According to a 2008 report by the Center for Economic and Policy Research  the decline in home prices from 2006 to 2008 alone has led to the loss of more than $4 trillion in real housing wealth, more than $50,000 per homeowner,” she says.

But boomers can’t blame it all on the housing crash. White says boomers have a tendency to “trade up a McMansion, instead of taking a ‘buy-and-hold’ approach to home purchases.”

A Call for Reform 

But baby boomers aren’t fully to blame for their lack of nest eggs.

While White agrees that baby boomers have lived beyond their means and have borrowed irresponsibly, she says the biggest reason for pension poverty is because the U.S. does not have a social contract offering pensions that other countries do.

White points out that countries such as Australia have a mandatory 401(k) style system; every employer but the self-employed is required to contribute the equivalent of 9% of pay to their accounts, three times what American companies typically contribute.

"The only "reform" to U.S. 401(k) plans is to allow employers to 'automatically enroll' employees in the plan at a 3% employee contribution rate and consider requiring small employers to offer an automatic IRA that employees would contribute to but employers don't have to,” she says. 

Boomer Savings Boot Camp

Experts agree retirees need at least 10 times their final pay in their accounts for their golden years. Baby boomers need to take a hard, honest look at their current savings and create spending plans for when the no longer have a steady paycheck.

"Once you are approaching retirement and you flip that switch to where now you have no more income coming in--you have to do a budget, at least to have to have some sense of where your money is going,” says Rose. “[Take] a quick snapshot of all of your necessities, only the things you have to have, you can get a sense of the things you could possibly do without if worse comes to worse.”

Once you have a snapshot of your savings, you might discover you simply can’t afford to retire yet – a problem that could have implications for younger generations.

 “It’s going to have a huge effect on the economy,” says White. “Most of the 38 million Boomers born between 1946 and 1956 who are scheduled to retire between 2011 and 2020 will have to stay on the job at least another eight to 10 years, making life hell for the nearly 40 million young folks born between 1989 and 1998--an even bigger baby boom that’s going bust.”