Younger Boomers Face a Looming Retirement Crisis

Recent reports show the youngest baby boomers who are now entering their 60’s have not fared as well as older individuals in the same generation when it comes to retirement planning and security.

The post-war baby boomer generation includes those born between 1946 and 1964, and while they populate the same generation, significant differences separate younger members from older. This includes retirement stability.

A recent Wall Street Journal article reports that while the majority of US wealth is concentrated among older adults, not all in that group are equal when it comes to retirement savings.

A study commissioned by the Alliance for Lifetime Income found that just over half of boomers who will turn 65 between this year and 2030 have less than $250,000 in financial assets.

That same study noted the disparity in retirement savings based on ethnicity and gender. The median savings for White Americans is $299,000, compared to $123,000 for Hispanics, and $49,000 for African Americans. Men reported a median savings of $269,000, while women reported just $185,000.

While people of color have lower available savings, they make up a larger proportion of younger baby boomers. As an example, the article referencing census data found that Hispanics account for about 15 percent of young boomers and eight percent of older boomers.

Traditional sources of retirement income have included pensions, savings, and Social Security. Younger boomers, however, are less likely to receive a pension and have relied more heavily on investments, including 401(k) plans from their employer.

Many who participated in their employers’ 401(k) plans or invested on their own experienced a dramatic hit to their savings during the Great Recession. Many have not fully rebounded.

This means that younger baby boomers rely more on Social Security, which is perpetually underfunded. In fact, the article highlighted data from the Federal Reserve’s Survey of Consumer Finances which shows around one-third of younger boomers have only the promise of Social Security benefits to meet their retirement needs. This compares to about one-quarter of older boomers when they were the same age.

The absence of a pension, diminished investments, and a reliance on Social Security adds up to a crisis for many who will soon be entering retirement age – a retirement crisis that is growing and hitting more and more workers.

Fiduciaries and other experts in the economics of retirement have raised concerns, while also working to promote opportunities to address this crisis. One thing we can do that doesn’t require a degree in finance or economics is tell our elected officials to keep politics out of investment decisions made on behalf of the state or its retirees.

Politics has no place in public finances or pensions. To mitigate risks and stem the tide of a looming crisis, allow investment professionals to work for the benefit of our public servants so that they can enjoy their well-earned retirement.