Aug 14, 2024
Baby boomers and those older have an average of $120,300 saved for retirement, according to Northwestern Mutual’s Planning & Progress Study 2024. Considering that the consensus among them is that it'll take $990,000 in savings to retire comfortably, low savings could be troubling for those who aren’t already deep into their golden years.
It may also explain why so many older Americans are concerned about running out of money in retirement. But here are three other reasons why baby boomers might be eating into their savings at too rapid a pace.
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.
Must Read
- You can now build wealth like a landlord for as little as $100 — and no, you don't have to chase down rent or take 3 A.M tenant calls
- Goldman Sachs used to hoard prime real estate deals for the ultrarich. Two ex-analysts just opened the door for $250
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
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 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.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Preserve 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.
You May Also Like
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
- Robert Kiyosaki issues grim warning for baby boomers. Many could be ‘wiped out’ and homeless ‘all over’ the country. How to protect yourself now
Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
