Baby Boomer Retirement Savings: How Do You Stack Up?
They worked diligently, built a life for themselves, paid their taxes, and put money away in a retirement plan. We’re talking about baby boomers.
As the big bulge of this generation (born between 1946 and 1964) enters their sunset years. There is a lot of data relating to their lack of preparation for their later years.
Many boomers are coming face-to-face with a new American economic reality: Retirement means a transition into relatively hard times.
Research by the Insured Retirement Institute suggests trouble for many retiring boomers.
IRI found that only 55 percent of baby boomers have any money saved for retirement, and almost half of the 45 percent who don’t have retirement savings had savings at one time. This suggests that many retirees are, or will be, surviving off of their Social Security benefits.
How Much Do Baby Boomers Have Saved for Retirement?
Insufficient retirement income paints a gloomy picture for many boomers. Many in this generation have already started to tap into their retirement savings, while the rest still have a few more working years to grow their nest egg.
According to the 21st Annual Retirement Survey of Workers by the TransAmerica Center for Retirement Studies, baby boomers have an average of $202,000 saved for retirement.
This is not nearly enough to last throughout retirement, as adults between the ages of 65 and 74 spend an average of $48,885, according to information from BLS.
Why Baby Boomers Lack Retirement Funds
There are myriad reasons why many baby boomers may not be financially ready to retire.
For many workers, planning and saving for retirement is an uphill battle.
“Life happens. People are busy with their careers and raising kids,” says David Neuwirth, Senior Vice President, Investments at David Lerner Associates.
“While many people have financial planning on their to-do list, they don’t do it because it’s never the most pressing thing. Then, they find themselves a few years from retirement with no idea where to start, and there’s not a lot of room to catch up.”
Another key reason baby boomers lack funds is the stock market decline during the 2008 Great Recession. This event scared many seniors out of the markets and caused them to miss the subsequent rebound.
Panic selling devastated many retirement accounts, and the following years of low-interest rates considerably weakened the yields of bond funds that retirees were urged to purchase. These yields were, in turn, invested in capital that earned virtually zero interest.
With wages plateauing, it was hard for most boomers to ramp up savings in their final earning years.
Tips Boomers Can Use to Boost Their Retirement Savings
For baby boomers looking to boost their retirement savings, it’s not too late.
However, it’s critical to be strategic about the financial moves you’re making so close to your sunset years.
Here are some tips to consider:
- Continue Working
If the sound of leaving the workforce doesn’t appeal to you, consider working in some capacity even after you’ve reached retirement age.
This is a great way to supplement and stretch your retirement income rather than deplete it.
In addition to earning money, boomers might find it beneficial to get out of the house, create social connections, and do something that feels worthwhile.
- Take Advantage of Catch-Up Contributions
The IRS lets savers over the age of 50 make additional contributions to their retirement savings accounts.
The contribution limit for 2023 is $6,500 (plus the additional $1,000 catch-up contribution).
Boomers who haven’t saved as much as they need to retire comfortably can capitalize on these extra contributions to ensure they save as much as possible in their final working years in a tax-advantaged way.
- Postpone Social Security Benefits
It can be tempting to tap into your Social Security when you hit age 62, but you’ll benefit more if you hold it off.
Filing before full retirement age means you’re looking at decreased benefits of almost 75 percent of the amount you’re eligible for.
Every year you delay your benefit until age 70, your benefit will grow 8 percent, allowing you to receive a maximum of up to approximately 132 percent of your regular benefit amount.
- Reduce Your Expenses
Find ways to cut your expenses to make your retirement savings last longer.
Here are a few strategies to consider:
- Consider downsizing your home to reduce housing-related expenses such as mortgage payments, property taxes, and maintenance costs.
- If you have multiple vehicles, consider downsizing to one or using public transportation when feasible. You could also explore options such as ridesharing services or carpooling to save on fuel and maintenance costs.
- Assess your subscriptions and memberships, then cancel services you no longer need or use frequently. This can include streaming services, cable/satellite TV subscriptions, magazine subscriptions, gym memberships, etc.
- Consider cooking at home more often, plan meals in advance, and make use of sales and coupons. If you have to eat out, opt for affordable restaurants.
- Engage in free or low-cost hobbies and social activities. Look for free classes or workshops, volunteering opportunities, community events, and senior centers that offer different activities and programs.
- Consult An Financial Advisor
Seek guidance from a financial advisor who specializes in working with seniors.
A financial advisor can help you evaluate your current financial standing, provide tailored advice, and help with retirement planning, investment strategies, and estate planning.
Look for a financial advisor who is a fiduciary. Fiduciaries are obligated to put your interests ahead of their own.
Boomers are leaving the workforce in droves as they transition into retirement.
Even with insufficient retirement funds, it’s never too late to boost your nest egg and give yourself more of a financial cushion that will allow you to retire comfortably.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.