Many baby boomers-the 76 million Americans born between 1946 and 1964-have retired or are heading toward retirement, with roughly 10,000 retiring every day. Are they prepared? Based on savings statistics and actuarial charts, the answer is a resounding no. Insufficient savings and a lack of planning paint a gloomy picture for many retirees. This means more people working into their 70s and 80s, more poverty among elders, and more public resources devoted to health care for seniors. One in five baby boomers say they are concerned they will not have sufficient savings to cover basic living expenses in retirement.
The Statistics Are Frightening
A study by GoBankingRates found that 30% of people 55 and over have no retirement savings, with another 26% claiming they have saved less than $50,000.
When compared to typical benchmarks needed for a successful retirement, 54% of the older Americans in this survey lacked sufficient retirement funds. Nearly one-fifth of all baby boomers do not contribute to workplace savings plans such as a 401(k), and the majority of those who do are not contributing enough. And of those with savings, nearly half have less than $100,000, which would generate less than $7,000 a year in retirement income.
For the majority of baby boomers, this may mean putting off retirement, or not retiring at all:
- The Transamerica Center for Retirement Studies found that 66% of baby boomers plan to or already are working past age 65, or do not plan to retire.
- According to the Center on Aging & Work at Boston College, a recent study suggested that 64% of workers would like some kind
of “phased retirement.” - However, the study also found that while approximately half of employers offered phased retirement for the top employees, only 10-20% of employers offered it for all employees.
One of the biggest misconceptions about retirement concerns Social Security. With more than half of baby boomers counting on Social Security as a primary source of income in retirement, most think they will need less, and receive more, than they actually will. A survey by the Indexed Annuity Leadership Council found that 60% of baby boomers think they need less than $1,000,000 in retirement, when in reality at least $250,000 will be needed for health care alone. More than half think the average monthly Social Security payment is $500 more than it is, a budget miscalculation that will leave a nearly $250,000 shortfall over a 30-year retirement.
Recently, the number of people taking Social Security early (age 62) has declined, but experts still believe that too many people are taking Social Security earlier than they should. Waiting until 70 to withdraw from Social Security could increase a retiree’s monthly payout by approximately 75% over taking it at age 62, and 32% over taking it at age 66.
In addition, many retirees do not realize that most tax-advantaged retirement accounts, such as traditional IRAs, SIMPLE IRAs, SEP IRAs, and most 401(k)s, feature required minimum distributions. While individuals may withdraw from these retirement accounts beginning at age 59 without penalty, once they turn 70, individuals must take “required minimum distributions” each year. The amount an individual must withdraw is tied to an IRS formula based on life expectancy, and the penalties for noncompliance are steep.
Financial planning experts say that another miscalculation relates to life expectancy. Too many baby boomers do not to plan to live past 90, even though nearly half of women now age 65 will live to their 90th birthday. (The number is slightly lower for men.)
If all this sounds gloomy, it could get worse, as the two entitlements boomers rely upon most heavily — Medicare and Social Security — will run out of money in 20 years if drastic action is not taken.
Baby Boomers vs. Millennials: A Generational Comparison
While baby boomers face immediate retirement challenges, millennials aren’t faring much better in their retirement planning. According to recent studies, almost half of Americans under 30 don’t save for retirement at all. However, the obstacles each generation faces differ significantly.
Millennials face unique challenges that baby boomers didn’t encounter at the same age. The average millennial carries $35,051 in student loan debt with yearly payments of $4,239 — a burden that delays their ability to save. They’re also buying their first homes at age 33, compared to boomers who typically became homeowners in their mid-twenties. The 2008 recession further delayed millennials’ career starts, pushing their average retirement savings start date from the recommended age of 23 to 32.
Despite these challenges, millennials have one crucial advantage: time. While 64% of millennials believe they’ll never accumulate $1 million in savings, financial experts note that consistent saving from their mid-twenties through their working years makes this goal achievable. In contrast, baby boomers who haven’t saved adequately have limited time to catch up, forcing many to work into their 70s and 80s.
Both generations share troubling misconceptions about retirement planning. Baby boomers overestimate Social Security benefits by about $500 per month, while millennials expect to retire at 59 but will likely work until 75. The key difference is that millennials still have decades to course-correct, while baby boomers must act immediately to salvage their retirement plans.
The good news is that it’s never too late to plan for retirement. The three factors that determine if you will have sufficient savings are how much you save, how long you save, and how much you earn.
For those who have waited too long, the amount saved is the crucial factor. The advice of a retirement expert and adherence to a strict savings plan could make all the difference.
None of the individuals are actual clients, witnesses, attorneys, or parties to actual legal proceedings. Any resemblance to actual persons, living or dead, or actual events is purely coincidental. The individuals who appear on the accompanying photos are dramatizations of fictional clients, witnesses, attorneys, or other parties.
Take Action Today
Whether you’re a baby boomer approaching retirement or planning for the future, proper financial and estate planning is essential. The statistics may be sobering, but with professional guidance and disciplined saving, a secure retirement is still achievable. Don’t let these numbers become your reality — start planning today to ensure your golden years are truly golden.
At Perry Morgan, we help clients of all ages with comprehensive estate planning, trust administration, and elder law matters. Contact us at (925) 660-7544 or schedule a free consultation online to discuss how we can help secure your financial future and protect your assets for generations to come.
