Yahoo Finance Retirement Outlook 2024: Less Than Half of Boomers Have Adequate Savings — Will Younger Generations Suffer?
According to some economic experts, there’s an impending crisis due to the large number of baby boomers retiring with what is largely considered grossly insufficient savings. Another aspect of this grim prediction is that it could adversely affect younger generations who’ll be charged with their care. For Americans raising a family and working full-time, the responsibility of eldercare is an eventuality that most haven’t fully prepared for.
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We’ll take a look at some factors that have contributed to this worsening issue. Then, we’ll cover tips to optimize the time and resources available to retirees and their potential caretakers.
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Baby boomers haven’t saved enough money for retirement
While there could be several reasons for boomers’ financial condition, the statistics aren’t painting a pretty picture:
The median retirement savings of baby boomers is $202,000
Forty-three percent of 55- to 64-year-olds had no retirement savings at all in 2022, according to the Federal Reserve Board
The National Council on Aging estimated 17 million people over 65 are considered economically insecure
The 4% rule is a general guideline recommending an annual withdrawal rate for retirees so that retirement savings can last at least 30 years. If American households between the ages of 55 and 64 are spending $78,000 each year, retirement savings would need at least an aggregate value of about $2 million to keep with this level of annual spending in retirement — a far stretch from the average $200,000 in savings for this aging demographic.
For those who’ll live far beyond age 64, long-term care costs could utterly eclipse this $78,000 figure with at least two elderly household members requiring living assistance. A study by Genworth reported the average monthly cost of an assisted living facility is now $4,500, while the monthly costs for homemaker services and home health aides are $4,957 and $5,148, respectively.
Another factor exacerbating this issue is many Americans aged 55 and over who don’t have a spouse or children to care for them. A 2017 study published in The Journals of Gerontology: Series B reported, “An estimated 6.6% of American adults ages 55 and older do not have a living spouse or biological children. Of those, roughly 1% do not have a spouse or partner, children, or biological siblings. Among women over 75, that figure rises to 3%.”
These numbers seem small, but they equate to millions of “kinless” Americans who may face issues caring for themselves alone as they age.
Baby boomers’ lack of preparation for retirement, insufficient savings, rising inflation, increasing life spans, and fewer options for long-term care have some economic analysts predicting a crisis of epic proportions, with much of the fallout landing on the shoulders of baby boomers’ children.
Downstream effects could affect many aspects of society
Social Security and Medicare are trending towards depletion
The prediction for social safety nets like Social Security and Medicare has remained consistent. Essentially, the funds may last only a little while longer. Not to mention that the original intent of Social Security was to supplement retirees, not totally replace individual’s responsibility to save for retirement. However, that’s largely where we are today.
A 2022 Social Security Trustees report predicted the exhaustion of the trust fund by the year 2034. A 2019 Medicare report anticipated its hospital insurance trust fund will be exhausted by 2026.
A significant contributing factor to this phenomenon is the declining birth rate, which means fewer workers are paying into these trust funds. This ultimately affects the amount of money available for beneficiaries.
Long-term care infrastructure is already under duress
The U.S. currently has about 15,000 long-term care facilities, and that number is decreasing due to labor shortages and the persisting fallout from the COVID-19 pandemic. According to a report from the American Health Care Association in June of 2023, 55% of nursing homes are turning away prospective residents and patients, and 48% of nursing homes have waitlists spanning at least a few days due to labor shortages.
Though lawmakers are working on legislation to address caregiver shortages, there don’t seem to be any immediate solutions to this issue. But someone has to help care for an aging population. This brings us to the next point.
The plight of the sandwich generation
With baby boomers aging out of the workforce and professional caregiving resources wearing thin, the next in line to help would be their adult children — mostly millennials and Gen Xers.
According to a Pew Research Center survey conducted in October 2021, 23% of American adults are now part of the “sandwich generation.” The report defined the demographic as “adults who have a parent age 65 or older and are either raising at least one child younger than 18 or providing financial support to an adult child.”
Furthermore, a report by the Teachers Insurance and Annuity Association of America (TIAA) and the University of Pennsylvania School of Nursing (Penn Nursing) revealed “one in five adults now provide uncompensated care to loved ones with health problems.” The report explained that many caregivers cover expenses out of their own savings. “On average, the caregivers’ uncompensated expenses — things like housing, healthcare and transportation–add up to more than $7,000 a year.”
What can you do if you haven’t saved enough for retirement?
Inadequate retirement savings isn’t just a “boomer issue.” If you are among the millions of Americans behind on retirement savings, just know that you aren’t alone. Increasing inflation rates have repeatedly moved the goalposts and caused many to feel behind on their goals to save for retirement.
For instance, a Gallup poll from May of 2023 indicated only 43% of non-retired Americans expect to live comfortably in retirement. In the context of investing, time — coupled with compound interest — is one of your best allies in the race to save for retirement.
However, if you’re behind on this effort for any reason, here are a few ways you can make some progress toward your retirement savings goals:
Start saving now: Take advantage of employer-sponsored retirement accounts like 401(k)s or ROTH IRAs.
Take advantage of any employer match offered for retirement savings plans.
Consider opening a taxable brokerage to invest extra money.
Find additional sources of income.
Delay retirement and, if possible, delay claiming Social Security benefits until the age of 70.
Downsize where needed. A smaller home or vehicle could help save money and reduce the funds required in your retirement years.
What can I do as a caretaker of someone with limited resources?
Although caring for an elderly relative can be difficult, there are ways to relieve some of the pressure of this strenuous responsibility. Here are some things to consider:
Get a full understanding of your loved one’s financial situation. Use this knowledge to create a care plan as soon as possible.
Seek the assistance of other relatives to help share the burden of care among more people.
Take time out for yourself by attending a caregiver retreat.
Look for jobs with benefits such as flextime, paid family leave, geriatric care management services and emergency backup care.
The dismally low savings rate among baby boomers presents a complex challenge to families and society at large. Ideally, some level of policy reform could help ease burdens on government programs, caretaking facilities and families. In the interim, the best route is to be as proactive and resourceful as possible.
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