5 Things Boomers Could Have Done Better in Saving For the Future
Written by
Nicole Spector
Edited by
Molly Sullivan
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There are members of each living generation who are under the impression that they — unfairly — shoulder financial blame from other generations. Surely you’ve heard a boomer go off on how millennials are avocado toast-addicted money wasters. And you’ve probably heard a Gen Xer say something about how Gen Zers don’t have a long enough attention span or sense of workplace loyalty to truly succeed.
And then you’ve heard all the snide stuff folks have to say about boomers. Oh, there are plenty of accusatory insults to choose from.
Yes, it’s sad that boomers get such a hard time from younger folks about their financial moves of yore, but the “OK, boomer” bad rap they get isn’t totally unwarranted. The truth is, a lot of boomers made a lot of money mistakes in their heyday of earning. But it’s not Gen X, millennials or Gen Z that boomers failed the most; it’s themselves. Millions of boomers just didn’t save enough money to ensure financially secure futures. And now, they’re hurting.
What are five things boomers could have done differently in order to better save for their futures? Financial experts weighed in with some information.
Invested Earlier in Life
Financial experts recommend investing as young as you can for good reasons; the earlier you start the more savings you can build over time. A lot of boomers missed the memo and didn’t start investing until later in life, which seriously impacted their savings.
“They didn’t start an investment habit early enough,” said Dave Fortin, CFA and co-founder at FutureMoney. “Thanks to the power of compounding returns, investing even small amounts early and consistently can be a powerful wealth-building strategy that will make a big difference once you are ready to retire. You don’t need to invest a lot, but if you make a commitment and create a habit of putting away a little bit each week, you are essentially giving yourself a future gift of financial security.”
Taken Some Risks and Stayed the Course With Investing
Investment is like a game of chess in that you have to be a strategic thinker. You need to hone your mind to focus on long-term gains rather than short-term fixes. And you need to be willing to take some investment risks and not jump ship when the waves get rocky. A lot of boomers failed to do this.
“One of the biggest mistakes many boomers, and other generations for that matter, have made is failing to stay the course,” said Robert Johnson, PhD, CFA, CAIA, chairman and CEO at Economic Index Associates. “Wealth is accumulated by investing in risky assets and sticking with that plan whether the market is moving up, down or sideways. Oftentimes, people panic and sell out of risky assets after the market has turned down, only to get back into these same assets when the market has already recovered.”
Johnson pointed to the Great Recession as an example of a time when boomers failed to stay the course — to their detriments.
“Many investors panicked during the financial crisis of 2007-09 and sold out of equities when the market fell 37% in 2008,” Johnson said. “Had they simply stayed in course and remained in equities in 2009 and 2010, they would have recouped their losses as the market rebounded and returned 26% and 15% in 2009 and 2010, respectively.”
Embraced Passive Index Investing
It would have benefitted boomers to be more aggressive in passive index investing.
“Passive index investing has a big advantage and that is it minimizes costs,” Johnson said. “Minimizing fees and transaction costs ensures that more of the investor’s hard-earned cash is being put to work. Just as the stock market returns compound over time, the deleterious effects of high fees and transaction costs also compound over time.”
Wiped Out Credit Card Debt
A lot of boomers really overdid it with credit cards. They overused them and didn’t pay off their debts in full or on time. This both is and isn’t their fault; credit cards, though long in use, weren’t as well understood by users back then, and plenty of people got sucked into debt without knowing the full extent of the repercussions.
“Credit cards started to become more popular in the ’80s and ’90s when boomers were young adults and many didn’t fully understand how credit card debt works,” said Erika Kullberg, a personal finance expert, attorney and the founder of Erika.com. “This led to many boomer consumers carrying a lot of credit card debt which hurt them financially and hindered their future savings and investment contributions.”
Prepared For Healthcare Expenses in Retirement
“While many boomers did make a strong effort to save for retirement, they may not have anticipated how much they would need to save for medical expenses,” Kullberg said. “We’re living longer than ever which is amazing — but senior citizens can end up with a lot of expensive medical care they hadn’t saved for. They can also need in-home care or to pay for a nursing home which is super expensive. Many would have benefited from buying a long-term care insurance policy when they were younger to help cover those costs down the line.”
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