According to Investopedia, Boomers only have an average of $150,000 saved for retirement. Plus, nearly 70% of Boomers believe they’ll have a harder time achieving financial security in retirement than their parents. Why have some Boomers fallen behind on investing? Here are 11 reasons that help explain their lack of savings.
1. Unemployment During The Great Recession
The Great Recession caused many Boomers to lose their jobs, which halted their ability to invest. Since the economic recovery was slow, it may have taken some Boomers years to recover financially and begin saving for retirement again.
2. Panic Selling Investments
Additionally, some Boomers panicked and sold investments during the Great Recession according to Investopedia. This caused them to lose a large portion of their retirement savings. If they had held on to their investments instead, they would’ve rebounded.
3. Low Incomes
Although Boomers have a reputation for being the wealthiest generation, not everyone in the cohort is rich. In 2022, 30% of people over 65 were considered financially insecure, which means they earned less than $27,180. Bringing home a low income can make it hard to pay bills, let alone save.
4. Sandwich Generation
For many years, Boomers were a sandwich generation, caring for both their aging parents and Millennial children. Some Boomers left the workforce to serve as caregivers and couldn’t save without income. Even Boomers who kept working may have provided their parents with monetary support, straining their savings and finances.
5. Expected Pension Income
Another reason why some Boomers don’t have much saved for retirement is that they expected to receive income from a pension in their golden years. But pensions may face issues like insolvency, which can reduce benefit amounts and jeopardize retirees’ financial security.
6. Late Start on Saving
Many Baby Boomers were already mid-career when 401(k) plans started to become available. As a result, they got a later financial start and didn’t begin saving until a median age of 35.
7. Lack of Financial Planning Advice
Because 401(k) plans were so new, there may have been less understanding of the importance of contributing. Boomers who didn’t know how crucial it was to save for retirement might’ve prioritized other financial and lifestyle goals instead, causing them to fall behind on investing.
Today younger generations benefit from having easy access to financial planning advice through the internet.
8. Suboptimal Spending Habits
According to Yahoo Finance, Boomers tend to waste money in certain areas, such as travel, home renovations, and gifts. Suboptimal spending habits may be a factor in their relatively low savings balances.
9. Supporting Adult Children
Roughly 65% of Boomers provide financial support to adult children, which could be hampering their ability to save and pay down debt. Suze Orman is urging Boomers to stop sending money to their children so they can prioritize their own financial security.
10. Gender Wage Gap
In 2020, women earned 18% less than men, which can make it harder to set money aside for the future. In fact, women’s retirement balances tend to be three-quarters of men’s on average. Although the gender wage gap hits solo females the hardest, it can still hurt dual income couples and may help explain Boomers’ insufficient savings.
11. Poor Financial Decision-Making
Cognitive decline is also starting to affect some Boomers and prevent them from making good financial decisions. Certain cognitive impairments can cause those affected to spend more money or make them more susceptible to financial scams, limiting their ability to save in their last working years.
As Boomers age, they’ll need a plan to secure the savings they do have, such as naming a power of attorney to make financial decisions for them when they’re no longer able.
Retirement Is Still Possible
Baby Boomers believe they need roughly $1 million to retire. However, it’s still possible to exit the workforce with less savings. Between Social Security, pensions, savings, and additional sources of income such as part-time work, Baby Boomers can get by in retirement.
However, living on less may require them to shift their lifestyle expectations for their golden years. While their lower savings balances may not support a life of luxury, they can still find lower-cost hobbies and pursuits to occupy their time.
Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.