Shocking Baby Boomer Retirement Statistics That Keep Us Up at Night

By Bobby Moyer, CFA, CFP®, CAIA

Bobby Moyer, CFA, CFP®, CAIA

Bobby Moyer, CFA, CFP®, CAIA Director of Research Senior Portfolio Manager

In America, we have 75.4 million Baby Boomers. And every day, around 10,000 of them officially retire.

We have to admit: The picture’s not too rosy for Baby Boomer retirements. For example, 40 percent of Boomers expect their standard of living to decrease in retirement. In fact, Baby Boomers are less prepared for retirement than their parents were — partially due to the pensions that disappeared during their working years. But beyond pensions, a variety of factors affect how comfortably and soon Boomers can retire.

Common Challenges for Baby Boomer Retirements

Challenge 1: The Great Recession Scared Investors

When the Great Recession of 2008 – 2009 crashed markets, many Baby Boomers saw a sizable hit to their retirement accounts. Fearful of losing their money, many pulled their investments out of the markets. Unfortunately, this move jeopardized their long-term savings. When the markets improved, those Boomers missed the upswing. In fact, 52 percent of Boomers have fewer savings now than before the Great Recession occurred.

Challenge 2: Uncertainty About Healthcare Costs

A couple retiring today may need up to $350,000 to cover health care costs. An array of costs can affect this total, one of which is rising prescription drug prices. In 2014, prescription drug spending in Medicare increased 17 percent due to higher prices. From 2015 – 2016, pharmaceutical prices rose another 9.8 percent.

Unfortunately, only 4 out of 10 Baby Boomers have tried to calculate their need for retirement savings. Of that 40 percent, only 6 in 10 calculated their estimated health care costs. Combine these roadblocks with Medicare's unclear future, and accurately preparing for retirement remains an ongoing Baby Boomer retirement challenge.

Challenge 3: People Are Living Longer Than Ever But Aren’t Saving More

On average, a 65-year-old woman today will live until 86.6 and a 65-year-old man will live until 84.3. Yet, only 54 percent of Baby Boomers have any type of retirement savings. Furthermore, the lack of adequate savings may push Boomers to take early withdrawals from retirement accounts in order to afford their lifestyle. By doing so, they more quickly deplete their funds they would otherwise rely on in retirement.

Without pensions, boomers’ heavy reliance on Social Security leaves them vulnerable. To start, 60 percent of Baby Boomers plan to rely on Social Security for their income. Meanwhile, in 2016, the average retired worker received merely $1,341 in monthly payments. Depending on how much your lifestyle costs, Social Security may not cover as much as you expect. Looking at how to diversify income becomes essential.

Steps You Can Take to Better Secure a Baby Boomer Retirement

1. Create Your Retirement Plan

No matter if you’ve already retired, make sure you have a retirement plan. For example, if you're just relying on Social Security to help you, what would you do if the furnace dies and you must pay $15,000 out of pocket? Rather than leave your retirement to chance, create realistic strategies. In fact, more than 90 percent of Baby Boomers who work with financial professionals have successfully built retirement savings.

Need guidance building a successful retirement plan? Contact us for a free  consultation.

2. Consider Working Longer

More than half of retirees will work longer to support their retirement savings. While this may not be ideal, continuing to work can significantly help you continue growing retirement income. You’ll have more years to both save money and build Social Security, which increases your distributions. 

3. Trust the Stock Market

Historically, the stock market returns around 7 percent per year over the long term, which means the major indexes double about every decade. However, in any given year the return can vary widely from that 7 percent average. Point being: Markets are naturally volatile — and overall, you can’t consistently predict when returns will be good or bad. While learning to trust the stock market again can make you feel leery, the markets do generally rebound. As long as you work with an investment advisor — and invest appropriately for your unique needs — you should make gains in your retirement income. 

4. Readjust Your Retirement Goals

Unless you root your retirement dreams in grounded perspectives, you may find yourself unable to retire when and how you want. For that reason, we encourage you to reassess the retirement you can afford and readjust your goals so they align with a realistic outcome.

No matter if you want to travel the world, move closer to grandchildren, or fulfill another vision for your retirement, you need to ensure you can successfully finance the lifestyle you desire. ACG can help you articulate your goals and put clarity around your money so you have the resources you need to successfully retire.

Want to explore this topic further? Contact us today to start a discussion. We’d love to help you make sense of your retirement finances.

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— Topics: Retirement