Why the Baby Boomer Generation is Waiting to Retire

While it might be heartening to learn that baby boomers are waiting to retire because they can’t bear to leave the work they love, that is simply not the case. The sad fact is that the generation born between 1946 and 1964 cannot afford to retire.


The Dream Has Evaporated

Many boomers have no savings to live on after retirement. In fact, only 69% of those still working say they have any savings. That’s down significantly from 84% in 2011. Pensions have become a thing of the past for most workers, replaced by self-savings such as 401(k) accounts. Unfortunately, not everyone has taken up that responsibility for ensuring their own post-retirement financial comfort. More than a third of boomers still say they plan to retire on nothing but Social Security.

But Social Security was never intended to be a person’s sole retirement income. The Social Security Administration says it’s supposed to cover only about 40% of your working salary.

Boomers who have saved are losing financial ground, thanks to stagnant interest rates that have stopped expected growth of some investments. The stock market is up since the Great Recession, but still volatile.

To compound the problem, life expectancy for baby boomers continues to increase. As of 2012, it was nearly 79 years. That means individuals are facing a longer retirement period during which they’ll need money to live.

Surprisingly, 19% of baby boomers don’t even bother to take advantage of their employer’s 401(k) program. Those who work for companies that match contributions are losing out in two ways. And of those who do have a 401(k), nearly a quarter have borrowed against it or simply withdrawn funds. This not only depletes principal, it generates a sizeable, immediate tax burden for the investor.


Others are waiting to bolster their Social Security check.

Even baby boomers who have managed to save enough to be financially secure in retirement are waiting to make the move. Critical funding pressures have resulted in age eligibility changes to receive Social Security income, and the agency has gone a step further by offering incentives for those who wait beyond the traditional retirement age to begin collecting their payments.

Baby boomers grew up knowing that 65 was the magic age at which everyone retires, unless they’re lucky enough to retire early. But 65 is out the window. According to the Social Security Administration, the officially-designated retirement age for baby boomers is now 66.

You can still begin claiming retirement checks at age 62, but you lose $1 for every $2 you earn above $15,720 per year. In 2013, about a third of men and nearly 40% of women baby boomers began to collect Social Security as they reached 62 years of age. That’s only about two-thirds the number who retired at 62 twenty years ago.

The longer boomers put off retirement, the larger their check will be. Waiting till age 70 will earn the largest possible check, and many say they plan to continue working even past that age, simply because they know they will need the extra income.

Financial experts point out that baby boomers can still take steps to improve their post-retirement situation, especially by making contributions to a Roth IRA. That allows catch-up contributions for those over 50, not to mention tax-free capital gains. You can continue to invest, and there’s no age at which you must start withdrawing funds.


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