Social Security income. the Baby Boomer generation, defined as those born between 1946 and 1964, is rapidly approaching retirement. However, with the ageing of this historic generation comes a slew of statistics on their lack of foresight in their latter years. In addition, many retirees face a bleak future due to a lack of financial resources.
The following is an overview of some research that reveals how well-prepared the Baby Boomer generation is financially for retirement.
Key Take Away
- A considerable proportion of Baby Boomers are approaching retirement age.
- Many people do not have enough money set aside for retirement.
- Aside from a lack of preparedness, the 2008 financial crisis and the persistently low-interest rates that have followed are significant reasons for Baby Boomers’ lack of retirement savings.
How Much Money Do Baby Boomers Have Set Aside for Retirement?
According to the TransAmerica Center for Retirement Studies 19th Annual Retirement Survey of Workers, Baby Boomers had an average retirement savings of $152,000. Unfortunately, this is insufficient to see you through retirement. According to the Bureau of Labor Statistics, people aged 65 to 74 spend an average of $48,885 per year.
According to the poll, 76 percent of workers believe their generation will have a significantly more difficult time reaching financial stability in retirement than their parent’s generation. Millennials (79 percent), Generation X (81 percent), and Baby Boomers all agree on this (69 percent ).
According to the Insured Retirement Institute (IRI), many retiring Baby Boomers are in jeopardy. According to the IRI, 45 percent of Americans have no retirement savings. Moreover, of the 55 percent who do, 28 percent have a household income of less than $100,000. This means that almost half of pensioners are (or will be) reliant on their Social Security income.
Why Baby Boomers Lack Retirement Funds
The stock market’s fall during the Great Recession is one of the main reasons Boomers are short on cash. Many older folks were scared out of the markets as a result of this catastrophe and thus missed the subsequent resurgence. Although reasonable, panic selling devastated many retirement portfolios.
Low-interest rates in the years after severely harmed the yields of bond funds that savers and pensioners were pushed to buy. These returns were then invested in the capital that earned almost no interest. With salaries stagnating, most workers found it difficult to increase their savings in their final years of employment.
The most recent blow has been the huge losses and gyrations of the stock market due to the panic selling in February and March 2020. Even those who resisted likely took heavy hits to their assets.
Making all this worse is a lack of planning. This is the first generation to face-saving for retirement on their own.
The assumption seemed to be ‘you are on your own. With luck, Generation X and the Millennials will benefit from seeing the impact of not planning early. But the Boomers have to deal with it now. The switch from pensions like benefit defined plans to contribution defined plans like 401(k)s have exposed baby boomers to the capital market risk and changed the way to deal with retirement savings.
The percent of Baby Boomers
The percent 26% of Baby Boomers that have a backup plan for retirement income if forced into retirement sooner than expected, according to the Insured Retirement Institute.
Retirement Crisis Start
It depends on which Boomers are being discussed, as well as the types of assets they may access, whether or not this can be labelled a crisis. Boomers who own their houses in a lower-cost-of-living area may be able to live on far less than a rent-paying retiree in a major city.
In 1962, just 69 percent of retirees received Social Security payments, according to the Social Security Administration. Today, 90 percent of seniors receive Social Security benefits. According to the Bureau of Labor Statistics, the average Social Security payment in 2020 will be $1,503, which is significantly less than the average wage of $3,668.
To avoid a retirement crisis Starting planning Right Now
Maintaining a pleasant living in retirement will be challenging for people who rely on Social Security benefits in their senior years. However, whether or not Baby Boomers are facing a retirement crisis is determined by how the issue is measured, where they live, and how their circumstances are comparable to those of their forefathers.