Peak Boomers Facing Retirement Without Adequate Financial Preparation
The economy is on the brink of a significant challenge as over 30 million baby boomers in the “peak boomer” age range are entering retirement, largely unprepared. This demographic of boomers, born between 1959 and 1964, constitutes the concluding and largest cohort of the boomer generation reaching retirement age according to a new report from the Alliance for Lifetime Income’s Retirement Income Institute.
The report highlights the economic headwinds facing this group, as over half of the “peak boomers” possess $250,000 or less in assets, indicating an increased reliance on Social Security income during retirement. Additionally, almost 15% of this cohort has $500,000 or less in assets, further underscoring the potential challenges they may encounter in meeting financial needs and maintaining their current standard of living. Lack of protected income, through solid pensions or higher savings, further exacerbates the retirement crisis for this demographic.
Potential Economic Consequences
The wave of retirements among the “peak boomers” has the potential to profoundly impact the US economy. Industries like manufacturing, healthcare, and education may struggle to replace as many as 14.8 million boomers leaving the workforce. This significant gap in the labor market could lead to a decrease in economic productivity. Moreover, the retiring boomers are also expected to have a considerable impact on consumer spending, with projections indicating a $204 billion decrease in spending among this demographic in 2032, most notably impacting the transportation sector.
While younger workers are poised to fill some of the jobs left by the retiring boomers, the report acknowledges the inevitable shift in productivity fueled by technological advances.
Changing Retirement Saving Patterns
Peak boomers have been caught in a transitional phase in retirement savings methods. As they entered the workforce, retirement plans shifted from defined benefit pensions, with their employer-subsidized steady income, to contribution-oriented schemes, such as 401(k)s, where workers are solely responsible for contributions. Only 24% of peak boomers currently have defined benefit pensions, further exacerbating the retirement crisis. Even these plans face potential underfunding issues.
Evidence suggests that retirement-aged Americans, particularly those of the peak boomer group, face financial difficulties. Over 50% of Americans over 65 live on incomes of $30,000 or less annually, with a significant portion living on $10,000 to $19,000. Almost 80% of retirees receive some form of Social Security income.
This economic disparity among retirees has prompted concerns of older Americans working until they become infirm merely to meet their financial needs. Consequently, with a bleak retirement outlook for many, the overall dignity in old age remains reserved for the wealthy.
If you are a boomer unprepared for retirement, we encourage you to contact our reporters at [email protected] and [email protected].
