Baby boomers are exiting the workforce in droves and transitioning into retirement. In the third quarter of 2020, about 28.6 million baby boomers (those born between 1946 and 1964) reported that they were out of the labor force due to retirement.
For many in this generation, they’ve already started to tap into their retirement savings, while others still have a few more working years to grow their nest egg.
A recent report by the TransAmerica Center for Retirement Studies found that members of this generation have a median of $162,000 across all of their retirement savings accounts. That’s compared to $33,000 for Gen Zers, $87,000 for Gen Xers, and $50,000 for millennials. The estimated median savings among all workers is $67,000.
Baby boomers also started saving for retirement later than any other generation, on average. The median age for boomers at the start of their retirement saving journey was 35. This is due, in part, to the shift away from traditional pension plans and rise of 401(k) plans in the middle of many boomers’ professional careers.
Baby boomer savers have had to navigate a shifting economic landscape that has made it more difficult to grow their retirement savings.
“Obstacles baby boomers have faced in saving for retirement include extremely low interest rates on fixed income investments, the dot com crash, the real estate/ financial crisis, the pandemic, and more recently 40-year-high inflation,” says David Rosenstrock, director at Wharton Wealth Planning. “In addition, rising health care costs, increasing life expectancy, caring for aging parents, the potential for reduced Social Security benefits (in the future), and labor force automation are all obstacles to saving.”
An increase in their life expectancy has made it more difficult for boomers to determine how much to save. When the first boomers were born, the average life expectancy was around 63 years old. Today, boomers can expect to live into their 80s.
“How long you live and how much you need to spend on out-of-pocket health care expenses and long-term care are big factors for figuring out how much you will need. Health care costs pose one of the most serious risks to retirement security, so it’s important to understand how to plan for this major expense and navigate the system,” says Rosenstrock.
In November 2022, the average monthly benefit for retired workers was just over $1,600, but that benefit could be diminished in the coming years. According to the 2022 Social Security Trustees report, retirees will only receive 77% of their full benefit starting in 2034 without additional funding to the social security program. Close to half of the baby boomers surveyed (46%) are more likely than younger generations to fear reductions in or elimination of Social Security in the future.
Many savers have faced the financial ramifications of both the 2007 recession and the early aftermath of the COVID-19 pandemic, but for boomers who are already in their retirement years or close to it, the impact can be more severe. Many savers dipped into their retirement savings to stay afloat. During the third quarter, the average 401(k) balance at Fidelity dropped an average of 23% from a year ago, according to recent Fidelity Investments research, which handles about 35 million retirement accounts. IRA balances dropped nearly 25% year over year and 403(b) account holdings—retirement plans typically used by nonprofits—were down 21%.
For Boomers who are looking to boost their retirement savings, it’s not too late. However, it’s important to be strategic about the money moves you’re making so close to your golden years.
Many boomers are already living off their retirement savings, but it’s not too late to boost your savings and give yourself more of a financial cushion that will sustain you for the rest of your year. By making the most of your tax-advantaged savings accounts, managing your Social Security benefits wisely, and looking for ways to add to your income, you can make sure that you have what you need to retire comfortably.
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