The more we hear about the retirement crisis facing the baby boomers, the louder the Talking Heads classic "Road to Nowhere" rings in our ears.
Why that particular tune?
It reminds us of how the richest generation in American history is suffering from collective amnesia as to how they ended up in such a dicey financial predicament, even as they rage against being treated like “little children” while begging for more “time to work it out.”
Sorry to be blunt, boomers, but it’s not just the soundtrack in our heads that’s telling us that you are traveling down a troubled path, it’s the data on our screens, too. Statistics from industry experts clearly show that your financial future is indeed certain — just not in a good way.
According to a recent study by the Transamerica Center for Retirement Studies, the median amount the boomers, those 76 million Americans born between 1946 and 1964, have saved for retirement is $144,000. Meanwhile, the Bureau of Labor Statistics reports that spending patterns among this generation average between $48,000 and $49,000 per year.
Couple those two figures together, mix in the fact that Americans keep living longer — from 75.6 years in 1993 to 79.1 in 2023 (according to the United Nations) — and it’s easy to see how the boomers' metaphorical road to nowhere is destined to end in a fiscal cliff.
Granted, the baby boomer generation worked and lived through the dot-com crash at the start of this century and the Great Recession in 2008, as well as numerous global conflicts that have affected their work history and their ability to save an adequate amount for retirement. The baby boomers were also forced to deal with the societal transition from workplace pensions to defined-contribution plans, which left many ill-prepared for retirement. Finally, the spike in health care costs, along with longer lifespans, has certainly not helped the boomers’ ability to sock away money to prepare for a rainy day, or year.
Unfortunately, without taking massive market risks, it’s tough to offer any advice on how boomers as a whole can turn things around. To paraphrase another well-known boomer band, the Rolling Stones, the “time value of money is not on their side.”
Still, there's value in understanding how the boomers arrived at this precipice, and not simply for the schadenfreude of it. Not at all. They remain the country’s most powerful force, economically, politically and structurally. They are the glue currently holding things together, and the decisions they make now will be massively impactful to the generations in their wake.
Look, going back to the song, the boomers know what they want — they want it all, including to live forever — so they're not going to fade away quietly. You can bet your Social Security check on that. They certainly are betting theirs.
Yep, it’s going to be the Gen Xers, millennials and Gen Zers who will feel the brunt of boomer decision making from here on in. So they'd better learn now how to save themselves from a similar fate later.
The good news is that these future generations appear to be getting the message and are determined not to follow in the financial footsteps of the boomers before them.
“Future generations after baby boomers are saving earlier than their predecessors but are still underfunded as a whole,” said Kevin Chancellor, CEO of Black Lab Financial Services. “I think knowing that the burden of retirement may fall mostly on their shoulders has them saving on average more than baby boomers.”
Chancellor added that time is on the side of younger workers, and that they need to take advantage of things like maximizing workplace benefits, automating their savings and begin saving as soon as possible.
“Legislation is doing its best to shore up the retirement crisis for future generations, but financial literacy is still at an all-time low," he said. "If a person does not know how to save and the most efficient methods, then they will always be behind on the savings curve.”
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