Baby Boomers, the generation born between 1946 and 1964 – right after the second world war, have always been portrayed as being a very wealthy generation. The media has consistently stated that a key reason for that has been social security benefits and other government transfers. While many Boomers prosper after retirement, is it true that Boomers are collectively an extremely wealthy generation, especially after they retire? This article will explore that question and more in great detail.
How Poor Are Baby Boomers?
If you look at the statistics, things are looking up for the Baby Boomers. Only about 10.3% of Americans aged 65 and older officially live in poverty. Approximately 30% of older Americans lived in poverty over almost sixty years ago in 1966. Boomers have significant control over a large portion of America’s wealth. They control about 50% of it.
To put this in perspective, an American in his or her 80s controls twice as much wealth as an American in his or her 50s. What plays a significant part in buoying Baby Boomers up is home ownership. Yes, most Baby Boomers are home owners. Their wealth (for the most part) has increased significantly and dramatically in recent year because the prices of most houses in America has increased significantly of late.
According to some financial surveys, about 48% of Boomers are confident that they will be able to maintain their current lifestyle once they retire. About 33% of Boomers will be wealthier after they have retired for 20 years. So, most Baby Boomers will do well financially after they retire.
But Baby Boomer Wealth is Far From Equally Distributed
Let me list the stats. Once you see the stats, you will see that Boomer wealth is definitely not equally distributed. While most to the majority of Boomers will be fine or thrive financially, a small portion will struggle. About 25% of Boomers will face at least some financial difficulty after they retire. Also, Boomers born in the mid to late 40s are significantly wealthier than those born in the early 60s.
Most retirees will grow wealthier as they progress into retirement. Also, almost half of Boomers will be able to maintain their current lifestyle (pre-retirement) well into retirement.
Have Most Boomers Built Up An Adeqate Nest Egg?
Many to most Boomers will receive hefty social security checks from the federal government. The majority of retired people already have a substantial part of their lifestyle funded by social security. At the end of 2023, the average Boomer had USD 194,000 in retirement savings. TransAmerica Center for Retirement Studies’s most recent survey discovered that.
That may sound like a lot of money, but given just how expensive things are in America and how relentless inflation is in America, that amount may not even last 7 years. The study presented some disturbing findings. While 44% of Boomers had at least USD 250,000 in retirement savings, 26% didn’t even have USD 50,000 saved up. Moreover, 10% had no savings at all.
Middle Class Baby Boomers had approximately USD 177,000 in home equity in late 2023. However, this wealth (once again) was not evenly distributed. A staggering 15% of those retired had NO home equity. Americans with a net worth of between USD 50,000 and 200,000 are considered to be in the middle class.
Have Boomers Prepped Enough Financially to Be Able to Retire Comfortably?
I mentioned stats that listed Boomers’ net worth and stated that most of them will do well and some may even thrive during retirement. But I never mentioned the cost of living. Let me analyze that information now. The Bureau of Labor Statistics (BLS) recently did a survey. It found that adults aged 65 to 74 spend an average of USD 48,885 annually.
Even after factoring the 4% rule in, Boomers will need to have saved up at least USD 1.22 million, given that most people spend about 30 years retired. So, clearly, the information I mentioned above may be more generalized because there are huge swathes of Boomer populations that aren’t financially prepped for a comfortable retirement. It’s time to analyze and explain why.
Why Are Some to Many Boomers in Financial Trouble?
The world plunged into a Great Recession in 2008. While most recovered from it, some didn’t. The stock market declined then, and more than a few Boomers were hit hard. Boomers were already a bit financially illiterate, and the crash intimidated many of them. They stayed out of the market for a long time, some even stayed away for good.
Unfortunately, they paid the price financially when the market rebounded and stock prices began to soar. Also, panic selling transpired quite a bit during the great recession and that significantly depleted and even destroyed many Boomers’ retirement accounts. Interest rates were extremely low in the years following the Great Recession. That affected many Boomers since they had invested in low yield U.S. government bonds.
So, their bonds didn’t yield high payouts. Boomers couldn’t invest these paltry sums into legitimate money-making schemes. What was worse was that wages remained stagnant in the years following. So, many Boomers found themselves in a hard place financially. They found it difficult to impossible to stash away money into retirement accounts during their final working years.
Then the pandemic hit and many Boomers engaged in panic selling in February and March of 2020. That caused huge and dangerous fluctuations in the stock market.
Many Boomers grew up during the Golden Years of the 50s, 60s, and 70s. America was prospering then and things were looking up. They felt that the government would take care of them in their later years. That, combined with the fact hat there just wasn’t enough financial education emphasizing the importance of saving for retirement meant that many Boomers didn’t stash away enough funds in their retirement accounts.
To be sure, some Boomers are adequate prepped. TransAmerica’s survey found that 26% of them have enough funds to fall back on if they have to retire early for any reason.
To What Extent Does Social Security Help Boomers Out?
The Social Security Administration’s most recent survey revealed that 90% of retirees receive some form of social security benefits. That’s a 21% increase from 1969 when only 69% of retirees relied on social security benefits to fund at least part of their retirement. The average Social Security benefit for the currently retired is USD 1,922 a month as of September 2024.
Note that this is not nearly enough to cover expenses. The average retiree racks up USD 5,044 according to the BLS.
Things Aren’t Looking as Rosy For Baby Boomers
The media always portrays Boomers as being rich retirees owning a vacation home in the North and retiring on expensive beachfront property in Florida. While Boomers aren’t doing badly financially, this article proves that this is clearly a hyped stereotype. Many Boomers will face financial challenges when retired. What compounds that further is that social security benefits – the one payment that almost all Boomers count on financially – may be cut back even further in the near future. That will make it more difficult for all Baby Boomers financially., regardless of how much they have saved up.
