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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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2. 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 ushered into retirement against their will. A 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 Possible reasons for a forced early retirement include health problems, job cuts or having an outdated skill set, according to Citizens Bank.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 the typical 65-year-old in 2023 could expect to spend an average of $157,500 on health-care costs throughout their retirement, assuming 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.

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Preserve your savings

It’s not so shocking that baby boomers are 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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Maurie Backman Freelance Writer

Maurie Backman is a freelance contributor to Moneywise, who has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate.

Disclaimer

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