Over the next six years, 30 million Baby Boomers will retire. Yet, “just over half have no more than $250,000 in financial assets,” according to the Wall Street Journal. That means those seniors will need to rely on Social Security benefits more than their earned assets.
However, economists debate if America has a retirement crisis. Christian Weller, professor of public policy at the University of Massachusetts Boston, is concerned about the financial stability of retirees. He points to data from the Fed’s Survey of Household Economics and Decisionmaking as a warning sign. “From 2019 to 2022, 51% of retirees between ages 65 and 74 were objectively financially secure,” he wrote in Forbes.
Furthermore, according to the Employee Benefits Research Institute (ERBI) survey of retirees, 75% of those seniors surveyed wished they saved more and 1 in 3 “remain concerned about health- or medical-related expenses, running out of money, and market volatility.”
Andrew Biggs, an economist at the American Enterprise Institute, thinks alarm bells are overblown. “Conventional financial planning…overstates the income seniors need. That owes partly to planners assuming that seniors require the same amount of money throughout retirement,” he wrote in the Wall Street Journal.
Making It Easier to Save
For those worried about American’s retirement picture, John Scott, the director of the Pew Charitable Trusts Retirement Savings Project, recommends automated savings programs. “These programs automatically enroll employees without a workplace retirement plan into an individual retirement account (IRA),” according to Scott. The auto-IRA’s have already been tested in several states including Illinois, where 40% of those surveyed said the plan improved their financial well-being.
Gen X and Millennials
Many in Gen Xers (those born between 1965-1980) are in a worse off-financial situation than their Boomer predecessors. The Wall Street Journal reported that, “The median household net worth of Gen Xers between 45 and 54 years old was about $250,000 in 2022, about 7% lower than that of baby boomers at the same age in 2007, according to inflation-adjusted Federal Reserve data.”
On the other hand, Millennials have improved their retirement standing after falling behind for a while. According to the Center for Retirement Research at Boston College, “Millennials had caught up on most indicators, and they surpassed earlier cohorts in wealth accumulation.” Gains in both housing value and financial assets contributed to the growth.
It’s Never Too Late
No matter where someone is in the retirement journey, financial planner Deacon Chris Kabat says it’s always a good time to save. “I’ve always told people it is never too late…there is the magic of compound interest. And the sooner you start, the more magic it can work for you.”
To listen to Drew’s conversation with Deacon Chris Kabat, click here.
