1. They got a late start
Northwestern Mutual’s study found that the typical boomer, and older generations, started saving at age 37. Because of this, a good number of boomers today may have a smaller nest egg than they actually need to live comfortably and are dipping into their savings at a faster pace because they have immediate bills they can’t put off.
Some boomers may have also taken a less aggressive approach to retirement savings because they expected Social Security to replace much of their retirement income. But according to the Social Security Administration, on average, retirement benefits will only replace about 40% of pre-retirement earnings.
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Discover the secret2. Some were forced to retire
Some people put off retirement savings with the expectation that they'll catch up later on in their careers, such as when they've finally paid off their mortgages, no longer have children living under their roof or are earning a higher income. One problem, though, is that some older workers may be retiring against their will. A 2023 survey from investment banking company Edward Jones found that 40% of retiree clients among financial advisers across the industry were forced to end their careers.
An early, unexpected retirement can put anybody at risk of a host of financial struggles. Namely, it can wipe out years of potential savings and derail retirement planning. Possible reasons for a forced early retirement include health problems, job cuts or having an outdated skill set, according to Citizens Bank.
3. High cost of health care
Fidelity reports that a 65-year-old retiring in 2024 can expect to spend an average of $165,000 on health-care costs throughout their retirement, assuming they don't have employer-provided coverage and they're enrolled in Medicare (Parts A, B and Part D). That figure accounts for Medicare premiums, copays and other out-of-pocket costs.
Since many boomers today are starting out with limited savings to begin with, it’s easy to see why health-care expenses may be forcing them to blow through their cash reserves at a rapid pace.
Retire richer: The secret to building wealth faster
Most people miss out on key opportunities to grow their wealth. Partnering with the right financial advisor can help you secure a brighter future. Learn how to make your money work harder for you today.
Discover the secretPreserve your savings
It’s not shocking that some baby boomers may be spending their nest eggs quickly. But if you’re worried about your savings dwindling down, you can work with a financial adviser to establish a safe withdrawal rate given your balance and expenses.
You may also want to consider boosting your retirement income with part-time work to take the pressure off of your savings. And finally, maintaining a stock portfolio can add to your savings even as you’re tapping into them.
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