Baby boomers born between 1960 and 1965 are facing significant challenges concerning their retirement savings.
These late boomers, who are approaching retirement age, possess lower levels of wealth in comparison to earlier boomer generations, as highlighted in a recent report issued by the Center for Retirement Research at Boston College.
Late boomers exhibit diminished wealth across various measurements, encompassing overall wealth, retirement funds, and 401(k)/IRA savings. The average sum within a direct contribution plan, such as a 401(k), 403(b), or IRA, for this group of boomers was $32,700, contrasting with $52,300 for mid boomers – those born between 1954 and 1959. The research further disclosed that the total retirement wealth for late boomers amounted to $299,703, while it stood at $350,449 for their slightly older counterparts.
Anqi Chen, a senior research economist at the Center for Retirement Research and one of the co-authors of the report, described this discrepancy as “unprecedented,” as she conveyed to Yahoo Finance.
The key reason why?
“The Great Recession (Dec. 2007-June 2009) hit late boomers during their peak earning years between the ages of 42 and 49,” Chen said. “This was meant to be an age when late boomers earned the most and saved more for retirement. But because…many lost their jobs, or had to accept lower-paying jobs, (they) were less likely to participate in a 401(k). So they could not accumulate enough, setting many of them back.”
“They have never recovered,” she said.
Additional factors include an increasing proportion of Black and Hispanic households earning less than their White counterparts and a decreasing share of households characterized by marriage and college degrees.
In actuality, these late boomers were predicted to shoulder extra responsibilities. The shift from conventional pension schemes to direct contribution plans, such as 401(k) plans, has had negative implications. This specific subset of boomers found themselves solely accountable for saving for retirement within their workplace.
Furthermore, the consequences of the alteration in the Social Security full retirement age were projected to somewhat diminish retirement wealth over time. The 1983 revision of Social Security gradually elevated the retirement age from 65 to 67, which was reached in 2022 for individuals born in 1960 or thereafter, effectively resulting in a 13 percent reduction in benefits.
Yet, the sustained repercussions stemming from the Great Recession proved to be an unexpected development.
There remain avenues through which late boomers can enhance their savings.
Various retirement calculators are accessible online and can offer valuable insights into one’s financial progress. Reliable sources include AARP, Bogleheads, Fidelity, Schwab, and Vanguard.
Considering the option of continuing work in retirement to meet financial needs is worth contemplating. More than a third (36%) of participants surveyed by the nonprofit Transamerica Center for Retirement Studies expressed this intention.