The Retirement Challenges Facing Baby Boomers


As baby boomers—one of the largest generations encompassing an estimated 74.9 million Americans—approach retirement, are they ready to face the challenges of their new economic reality? In a study by the Bankers Life Center for a Secure Retirement, a majority of baby boomers said they were not confident they have the financial means to retire comfortably. Nearly 69% of boomers were uncertain about having the financial resources to live securely until age 85, today’s typical life expectancy. As this generation enters their golden years, what must they consider to get the most out of their retirement?

Retirement redefined: The challenges ahead

With an estimated 10,000 boomers leaving the workplace each day over the next decade, what has changed for this generation and what will retirement look like as they enter this phase of life? Here’s how retirement for boomers differs from previous generations:

  • Increases in life expectancy: While longevity has increased and given us more time to do what we want to do, it can also put a strain your retirement resources. Men turning 65 today can expect to live on average to age 84.3 and women to age 86.6. Plus, nearly 1 out of 4 sixty-five year olds will live into their 90s. Baby boomers who have not planned for these additional years will find their resources exhausted earlier than expected.
  • The end of traditional pension plans: Many in the boomer generation were transitioned from pension plans to defined contribution retirement plans, such as 401(k)s and IRAs. The burden of responsibility shifted to boomers, requiring them to contribute and invest carefully to create their own retirement security. Unfortunately, according to the Insured Retirement Institute (IRI) report, 30% of boomers indicated that they stopped contributing to their retirement accounts.
  • Increases in healthcare costs: The estimated lifetime costs of healthcare for co-pays, deductibles and other healthcare expenses, excluding long-term care and most dental and vision costs, will come to $245,000 for a 65-year-old couple, according to Fidelity Investments. This is up 29% in 10 years, and tops the list of retiree concerns.
  • Entering retirement with more debt: Overall boomer debt is an estimated $6.1 trillion, with more than 80% of middle-income boomers having some debt. More than 4 in 10 adults who are 65 and older continue to have debt, requiring them to tap into their retirement income for repayment rather than living expenses.
  • Low interest rates: For boomers, the low interest rates are hitting at the worst time, drastically reducing their return on savings. With rates trending down during the past 20 years, the decline has had a significant impact on slashing boomer wealth.
  • Working longer: Many boomers are working longer than previous generations. The IRI report shows that 3 in 10 boomers have postponed their plans to retire. In fact, 26% anticipate retiring at age 70 or later. Working a little longer does benefit boomers, allowing them to get more from Social Security, contribute to their retirement savings longer and reduce the number of years their retirement funds have to last.

Planning ahead to ease retirement stress

What can baby boomers do to better prepare for these retirement challenges? Feeling secure about the future typically improves when you create a comprehensive plan and clarify the steps necessary to achieve your retirement goals. According to the Insured Retirement Institute 2016 report, more than 8 in 10 boomers who work with financial professionals feel more prepared for their retirement. While the boomer generation faces a new retirement landscape, understanding the issues and planning for the future can provide more confidence to navigate these turns in the road and improve the odds of retirement success.

The information herein has been obtained from sources believed to be reliable, but Wealth Dimensions Group, Ltd. (“WDG”) does not warrant its completeness or accuracy. Prices, opinions and estimates reflect WDG ‘s judgment on the date hereof and are subject to change at any time without notice. Any statements nonfactual in nature constitute current opinions, which are subject to change. Projections are not guaranteed and may vary significantly. Past performance is not indicative of future results.

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