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Nearly Two-Thirds of Baby Boomers Are Unprepared for Retirement, Study Finds
May 1, 2024
Between 2024 and 2030, more than 30 million Americans are poised to turn 65, as the youngest and largest cohort of the Baby Boomer generation reaches retirement age.
Unfortunately, a recent study from the Alliance for Lifelong Income found that, given their assets and the probability that their retirement will last 20 years or longer, the majority of these boomers will find it challenging to maintain their lifestyles. More than half (52.5%) have assets of $250,000 or less, meaning they will likely run through their savings and have to rely mainly on Social Security for income. Another 14.6% have assets of $500,000 or less, meaning nearly two-thirds are likely to strain to meet their needs in retirement.
On average, Social Security is intended to replace only about 40% of a person’s annual pre-retirement income, according to the Social Security Administration. The study also found that the majority of this cohort will begin taking Social Security benefits prior to turning 65. This cohort will reach full retirement age at 66 or 67, depending on their birth year. At full retirement age, a worker will receive 100% of the benefit they earned. Taking benefits prior to that can result in a substantially lower monthly benefit. For people who will be turning 65 this year, claiming as early as possible (age 62) would have resulted in a 30% cut to their benefits. On the flipside, workers who delay taking their benefits until after reaching full retirement age will boost their benefit by up to 8% per year until age 70.
The study also explored the broader economic impact of some 30 million Americans retiring. Employers will have to replace between 10.8 million and 14.8 million Boomer employees, and the loss of experienced workers is expected directly dampen productivity by between 0.9% and 1.3%. Consumer spending is expected to decline 15.3% as the peak Boomers enter retirement, and all told, the impact of their retirement is estimated to reduce GDP growth by 7.3% by 2030.
