For most of modern American history, it has been axiomatic that each generation would enter old age in better financial shape than their parents. Not anymore. Today’s retiring baby boomers are re-writing history, and not in a good way.
The Least-Prepared Retirees in Decades
“Americans are reaching retirement age in worse financial shape than the prior generation, for the first time since Harry Truman was president,” according to this penetrating Wall Street Journal article originally published in mid-2018. “This cohort should be on the cusp of their golden years. Instead, their median incomes including Social Security and retirement-fund receipts haven’t risen in years, after having increased steadily from the 1950s.” The sorry conclusion from the WSJ analysis is that “a generation of Americans is entering old age the least prepared in decades,” reversing years of progress for U.S. seniors.
Here at AgingOptions we share this news with a familiar sense of sadness and frustration, because we see the results of this unfortunate state of affairs every day. We also want to challenge our readers and radio listeners, especially those of you who are younger and have more time to prepare, not to wait any longer to put a robust and comprehensive retirement plan in place. Read on and we’ll share more details in a moment about what we believe is the most important tool you can use to prepare yourself well for all that the retirement years can bring: an AgingOptions LifePlan.
Perfect Storm for the Least-Prepared
For those either entering retirement today or soon to retire, the outlook is dim, says the article. “In total, more than 40 percent of households headed by people aged 55 through 70 lack sufficient resources to maintain their living standard in retirement, a Wall Street Journal analysis concluded.” That represents roughly 15 million American households. Many of these boomers are caught in a perfect storm: they have high average debt, they’re helping to pay off education loans for their kids, and they’re depleting savings accounts to support and care for aging parents. They are also the first generation to retire under what was supposed to be an improved retirement savings plan which has become known as the 401(k).
“In the postwar era, for a while, fixed government and company pensions gave millions a guaranteed income on top of Social Security,” says the Wall Street Journal article. “An improving economy led to increased wages. Many Americans retired in better shape than their parents.” That has changed dramatically today. “Baby boomers were the first generation of Americans who were encouraged to manage their own retirement savings with 401(k)s and similar vehicles. Many made investing mistakes, didn’t sock enough away or waited too long to start.” As of 2016, the median 401(k) balance for households with at least one worker aged 55 through 64 was $135,000, enough to produce about $600 a month in lifetime annuity income – helpful but hardly enough, even with Social Security benefits, to replace even a modest salary. Many seniors will be facing retirement with far less in their tax-deferred savings plans.
A Generation “Left On Their Own”
“This generation was left on their own,” said Alicia Munnell, director of the Boston College Center for Retirement Research, quoted in the Wall Street Journal article. The experience of one 56-year-old Iowa man is typical. He thought he was doing things right by saving in his 401(k) during his 20s. But after a divorce at age 34 he cashed out his savings. “He built up the fund again, then cashed out five years later after losing his job,” says the Journal. “It was just too easy to get at,” this man says. Today with modest savings plus hefty college loans for his daughter, “he doesn’t know when, or whether, he will be able to retire, in direct contrast to his parents, a former firefighter and a former teacher who collect guaranteed pensions.” Adds the Journal, “This prospect is upending decades of progress in financial security among the aging.”
The outlook is unlikely to improve any time soon, suggests the article, not only for aging boomers but for the nation as a whole. “Individuals will find themselves staying on the job past 70 or taking menial jobs as senior citizens. They’ll have to rely more on children for funding, pressuring younger generations, too.” Businesses will also feel the pinch. “Companies, while benefiting from older workers’ experience, also have to grapple with employees who delay retirement, which means they’ll be footing the costs of a less healthy workforce and retraining older workers.” Government, says the Journal, will be facing “a drain on public resources” triggered by the shortfall in retirement savings: as seniors reduce their taxable spending, Uncle Sam takes in less revenue, and government outlay for public-assistance programs for seniors is likely to rise to help older Americans who can’t make ends meet.
A Solid Plan Can Bring a Sense of Security
What’s the answer? Rajiv Nagaich of AgingOptions says we can’t allow doom and gloom to paralyze us. “No matter how old you are or what your circumstances,” he emphasizes, “a solid retirement plan is the answer. Even if you worry that you don’t have enough, a LifePlan can show you the way forward toward a better retirement than you thought possible.” Only a LifePlan from AgingOptions weaves together, not just your financial strategy, but all the essential elements that matter most, including legal, housing, health and family. With a LifePlan prepared, fear can be replaced with confidence and a sense of security.
If you’re ready to find out more, we invite you to join Rajiv at an upcoming LifePlanning Seminar – a great way to begin the New Year. To see a calendar of these popular free events, visit our Live Events page and register for the location that works for you. It will be our pleasure to greet you and to share with you and your loved ones the power of an AgingOptions LifePlan. Age on!
(originally reported at www.wsj.com)