The Life and Times of Baby Boomers

The Sixth of Numerous Fears

Baby boomers (often shortened to boomers) are the demographic cohort following the Silent Generation and preceding Generation X. The generation is generally defined as people born from 1946 to 1964, during the post–World War II baby boom. The term is also used outside the United States but the dates, the demographic context and the cultural identifiers may vary. The baby boom has been described variously as a "shockwave" and as "the pig in the python". Baby boomers are often parents of late Gen Xers and Millennials.

Today there are 76,400,000 baby boomers out of 332,000,000 Americans.  Boomers are far and away the largest generation in America and by 2030 every single one of them will be over age 65.  The economic, social, and healthcare impact of this development is enormous.  Just as an example, there is no person on earth who has a clue how Social Security and Medicare can be financed for the Baby Boomer generation. 

Baby Boomers harbor several legitimate, concerns about their future.  Near the top of the list is financial security.  It is no surprise retirement is a top concern for Baby Boomers, those born between the years 1946 and 1964. Recently revealed, 45 percent worry about not being able to retire when they want. Although 79 percent of Baby Boomers are saving for retirement, 52 percent believe they will have to delay retirement.

The biggest retirement concerns cited by Baby Boomers are health issues and health care costs. As a result, 23 percent of Baby Boomers are delaying retirement to retain their current healthcare benefits.  A study at Stanford University found the baby boomers have, in real terms, about 20 percent less in savings, 20 percent lower household wealth and 100 percent more debt than the generation born during World War II.

 

Boomers on average have $920,400 saved for retirement, the Charles Schwab survey of 2,000 Americans aged 55 to 75 with at least $100,000 in investable assets found. But they expect to spend $135,100 per year to sustain their ideal lifestyle in retirement, meaning their savings would run out after seven years.   In fact, the actual savings balance of most retirees is lower — the median 65-year-old has just $58,035, according to Vanguard Financial Services data.  Scroll back up to restore default view.

 

“Boomers in this study have been saving for retirement and are confident, but for many there’s a potential gap between what they have saved and the retirement they’re envisioning,” said Rob Williams, vice president of financial planning of Charles Schwab. “The reality is that they may come up short.”

So how do they expect to stick with this vision? By working more and putting their needs first.

This data leaves out a chunk of baby boomers who have no retirement savings whatsoever. According to data from the Insured Retirement Institute in 2019, about 45% of baby boomers surveyed had no savings.

 

Information Resources, Inc. reports that about half of the baby boomers who do not have retirement savings did have money set aside at one time, but they had to use the cash before retirement.

 

Savers are allowed to borrow from their 401(k)s, but any funds taken incur a 20% income tax and a 10% penalty, though there are a few exceptions for those who leave work at 55, are permanently disabled, or going through a divorce. Additionally, people facing hardships, such as disasters, paying for funeral expenses, paying for college, or covering medical expenses, can also withdrawal from 401(k)s.

 

Most recently, the CARES Act allowed anyone affected by the COVID-19 pandemic to take early distributions from their retirement funds. Savers are allowed to take up to $100,000 from their retirement plans without the 10% penalty at any age.

 

Some people took advantage of these penalty-free distributions. About 711,000 savers (or 3%) took a withdrawal from Fidelity retirement accounts by the end of June 2020, and investing firm Vanguard reported about 2% of its savers taking distributions. 

 

While many boomers once had retirement savings, they may have turned to their investments to fund needs before retirement, leaving them with little or nothing to live on later — a big problem.

 

The decisions we make and the consequences that follow.

 

Years ago, I saw a television documentary about a New York City woman who had been born into wealth and lived with her parents most of her life. They really did live the good life.  They traveled all over the world, stayed in the finest hotels and cruised on the best cruise ships.  Time has a way of changing things.  Her parents died and she was surprised in her early seventies to learn that there was no money left for her.  She ended up in a flop house paid for by the City of New York and was miserable beyond human understanding. 

Life rewards the well prepared and punishes the foolish.

 

Jan Ricks Jennings

Senior Executive

Senior Management Services, LLC

Jan.Jennings@EagleTalons.net           

 

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