5 Key Reasons Late Boomers Have So Little Money Saved for Retirement
Written by
Chris Adam
Edited by
T. Woods
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We often hear about young and middle-aged workers not saving enough for retirement. But what about their parents and those who are nearing retirement age?
It’s a big group to consider — an estimated 4.1 million Americans a year will reach age 65 over the next few years. That’s more than ever before, according to the Alliance for Lifetime Income.
Whether you call them “late boomers” or “peak boomers” — those born from 1959 to 1964 — many of these workers have little money saved for retirement.
The Great Recession
According to the Center for Retirement Research at Boston College, “the main culprit in late boomers’ misfortune was the Great Recession,” which stretched from late 2007 through mid-2009, marking the longest economic downturn since World War II.
During the Great Recession, joblessness soared, home values tanked and the S&P 500 took an enormous hit. The timing was especially awful for late boomers. According to USA TODAY, “the downturn hit when late boomers were in their top earning years, their early to late 40s.”
Job Losses and Salary Declines
Let’s take a closer look at the impact of the Great Recession on jobs for late boomers. They were hit especially hard by job losses. As such, those without jobs during that time had to cut back contributions to employer retirement accounts.
There were other factors at play as well. Many workers never returned to the workforce after losing their jobs. For others, their earnings never fully recovered. All of this came at a time when they were at points in their lives and careers where putting away more money for retirement would have made financial sense under more normal circumstances.
Hits to Retirement Savings
Speaking of retirement savings, they also took big hits during the Great Recession. In fact, according to USA TODAY, “In their prime earning years, late boomers saw their retirement funds decline from roughly $31,000 in value at age 47 to $26,500 at age 51, on average.”
This group of workers also faced an interesting change in dynamics in the workplace. Many boomers were already mid-career when more traditional defined benefit pension plans began to go away and the 401(k) emerged. According to WYPR, the boomers haven’t had as much time to save in these kinds of plans as the generations that came after them.
Demographic Changes
Another reason it appears late boomers have so little money saved for retirement is thanks to demographic changes.
According to the Center for Retirement Research at Boston College, “people of color have vastly less wealth than Whites, and the Hispanic and Black populations have grown, so as the retired population becomes more diverse, average balances look smaller.” The wealth gap between workers of color and White workers has actually narrowed, mostly due to their Social Security wealth increasing.
Hopes About Social Security
A final reason late boomers may have saved so little is their hope that Social Security would be able to help cover most retirement expenses.
Most experts say this is bad thinking. At current rates, Social Security is not going to be able to cover rising healthcare costs and allow most retirees to live at their current lifestyle levels.
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