“Baby Boomer” is a colloquial term for the generation born during the time after World War II when the birth rate increased significantly due to the bulk of the marriage-age males returning from the war, ready to settle down and start a family. The Baby Boomer generation is generally regarded as starting in 1946 (nine months after the end of World War II) and ending in 1960 or the early 1960s.
In any case, with the Baby Boomers now ranging in age from their late 40s to their mid 60s, retirement is very much on their minds, and for a number of reasons it’s maybe not looking as rosy as it was a few years ago. When aging Baby Boomers really sit down and analyze their financial situation in light of the projected costs of retirement, many of them have reasons for concern.
First, the good news: Baby Boomers will likely live a lot longer. With life expectancy on the rise, after the typical Baby Boomer retires at 65 or 70 or whenever they choose, it’s not as if their life will be at an end or close to it. Most will enjoy many more years of life; many will enjoy multiple more decades of life.
Now, the bad news: Baby Boomers will likely live a lot longer. However many post-retirement years their parents and grandparents needed sufficient funds to cover, it’ll likely be substantially more for the Baby Boomers.
Let’s look at some of the reasons that might be a problem:
1. More years means more living costs
After you retire and no longer have work income, that doesn’t stop your bills. You still have to eat, you still have to keep a roof over your head. And a good portion of that for many seniors will be at assisted living facilities or nursing homes, which are far from cheap.
2. Medical costs go up with age
Medicare is undeniably a godsend for seniors, but it isn’t perfect. It’s not as if seniors never have to pay a penny again for medical treatment once they hit 65. Medical issues can still deal a major financial blow even to those on Medicare, and the older one gets, the more likely one is to suffer from medical problems that are very expensive to fix, or more often very expensive not so much to fix as to survive with a little longer.
3. Social Security won’t cover much
Social Security serves its purpose of keeping (most) seniors out of abject, homelessness-level poverty, but if your sole income is Social Security it’s not going to do much more than that.
It’s not that the doomsayers are right who’ve been saying since about five minutes after Social Security was enacted in the 1930s that it’ll be bankrupt right around the corner, that “Social Security won’t even be around by the time I retire anyway.” No, Social Security is so untouchable politically that it’ll be paying out for as long as the present form of government in the United States exists, regardless of what else has to be shuffled around to make that happen. It’ll end when an asteroid strike, or global warming, or a total economic meltdown far worse than the Great Depression wipes away the present economy and system of government, and not a moment before.
It’s not that the Baby Boomers won’t get their Social Security checks; it’s that those checks are pretty paltry, relative to their expenses.
4. Savings have taken a hit
The recent downturn in the economy and major bear market has left many seniors and near-seniors with less savings entering retirement than they anticipated. Exacerbating this is the fact that in this bear market and that of the dot-com bust of 2000-2002, many people worried about their impending retirement scrambled to get out of the market at or near what turned out to be its low point out of fear of it collapsing even further, and thus missed a good portion of the upturns.
5. Inheritance ain’t what it used to be
Once upon a time, Baby Boomers were projected to receive trillions of dollars. (A Columbia University study projected $10.4 trillion.) For the most part that hasn’t materialized.
The reasons are parallel to those facing the Baby Boomers themselves. While the parents and grandparents of the Baby Boomers are not living as long as the Baby Boomers are expected to, they’re living longer than previous generations, and therefore using up a lot more of their net worth on themselves. Furthermore, they too have taken a big hit from the downturn in the economy.
6. You can only work so long
Many people as they approach retirement age assume that as a fallback, they can simply work longer than planned. If they had hoped to retire by 63, maybe that could be set back to 66 or 67. If they had always assumed they’d be retired by 70 at the latest, maybe they’ll just have to keep getting that paycheck to age 72 or 73 or even 75.
No doubt that will work for some Baby Boomers. They’ll be able to work a few extra years, and if they like what they do they might even be happier than if they had stopped.
But it won’t work for everyone. Aging beats people up, physically and mentally. You might be able to hold down a job in your 60s, maybe your 70s, maybe even beyond. But you might not. You certainly can’t guarantee that you’ll have the energy and the mental sharpness to have a paying job when you’re 78. The age will vary from person to person, but you’ll reach a point when retirement isn’t a matter of choice.
Regardless of where they are in the Baby Boomer generation and what their current financial status looks like, it would behoove Baby Boomers to get together with their accountant or a financial planner or someone with the right expertise-if they haven’t already-to put together a suitable plan that will put them in the best shape they can be for retirement.
Aleksandra Todorova, “Last-Minute Retirement Tips for Baby Boomers.” Wallet Pop.
Brenda P. Wenning, “Baby boomer retirement may be a bust.” MetroWest Daily News.
Liz Pulliam Weston, “7 pitfalls retiring baby boomers must avoid.” MSN.