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Are the Last Boomers Ready for Retirement?

‘Silver tsunami’ reaching age 65 lack savings, will largely rely on Social Security, new study says

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The last and largest cohort of boomers is rolling into their retirement years, but nearly two-thirds will struggle to meet their financial needs once they get there, according to new research on the so-called peak 65 surge.

Over the next several years, more Americans than ever before will reach the traditional retirement age of 65 — an estimated 4.1 million a year, according to the Alliance for Lifetime Income (ALI).

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More than half — 52.5 percent — have less than $250,000 in retirement assets and will have to “rely primarily on Social Security as a source of income,” according to “The Peak Boomer Impact Study,” commissioned by ALI’s Retirement Income Institute and released April 18. Another 14.6 percent of this group, with assets between $250,000 and $500,000, “will strain to meet their financial needs” over the course of retirement, the report says.

The average expected Social Security benefit for these “peak boomers” is about $22,000 a year, the study says.

“America has never seen so many people reaching retirement age over a short period, and well over half of them will find it challenging to meet their needs through their retirements, let alone maintain their current standard of living,” Robert Shapiro, a former U.S. undersecretary of commerce and lead author of the study, said in a statement. “They lack the protected income that many older boomers have from solid pensions or higher savings.”

Women, Black and Hispanic retirees in this group face the most acute shortage, Shapiro and coauthor Luke Stuttgen write in the report. Shapiro is the chairman and Stuttgen a senior analyst at Sonecon, a Washington, D.C.-based economic advisory firm.

The boom’s last wave

ALI, a financial-industry education organization that promotes annuities as a source of regular income for retirees, coined the term “peak 65” to represent this last wave of boomers, born from 1959 to 1964. The oldest boomers were born in 1946.

According to the study, this group, which has also been dubbed the “silver tsunami,” had median retirement assets of just under $225,000 as of 2022. Those assets primarily come from workplace retirement plans and individual retirement accounts (IRAs) but can also include bank accounts, pensions, annuities and nonretirement account investments in stocks, bonds and other vehicles.

In addition, peak boomers have median home equity of $156,000 and expected annual Social Security benefits of $22,342. Sixty-four percent plan to be fully retired by 2030, when they will range in age from 66 to 71, the study found, based on analysis of data from the University of Michigan’s 2022 “Health and Retirement Study.”

Financial advisers generally estimate that retirees need to replace 70 percent to 80 percent of their working income to maintain their lifestyles in retirement, and Social Security is only designed to replace about 40 percent, noted Jason Fichtner, chief economist at the Bipartisan Policy Center and executive director of the ALI's Retirement Income Institute, at an April 18 forum on the findings in Washington.

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While their home is “the single largest asset for most people,” it plays a limited role in retirement finance, Shapiro said at the event. “Seniors don’t want to sell their homes. They prefer to stay in place,” he said, and very few take out home equity loans. “So, the largest asset is not available as a source of income.”

The report “certainly shows that the median retirement assets, with Social Security, are not adequate to maintain the peak boomers’ preretirement level of living,” Shapiro said.

Big gaps by gender, race, education

The report also found wide disparities in peak boomer retirement readiness along gender, racial and educational lines:

  • Men in this group had median retirement assets of $269,000; women had $185,000.
  • Median retirement assets were $299,000 for whites, $123,000 for Hispanics and $49,000 for Black peak boomers.
  • The widest gaps were by education, with college graduates having median retirement assets of $591,000 compared to $75,000 for high school graduates and $7,000 for those without high school diplomas.

The median assets for Black workers and those without degrees “are sufficient to support people for a couple of years” in retirement, said Shapiro. He called the extent of those disparities among peak boomers, whom the study found to have less higher education than the population at large, “one of the two or three major findings of this analysis.”

“The data suggests — though I haven’t thoroughly investigated this — that retirement increases inequality,” he said. “The differences in retirement assets based on education and race are much greater than the differences in income across society based on education and race.”

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One reason for the wide gaps is the decline of “defined benefit” pensions as a regular feature of U.S. working life, Shapiro said. About a quarter of peak boomers have such plans, which provide former workers with a fixed monthly check based on their past earnings and which covered about two-thirds of private-sector workers in 1980. They have been largely supplanted by “defined contribution” savings plans such as 401(k)s, in which employees make contributions and manage withdrawals in retirement.

“Defined-benefit pensions were the great leveler in retirement income,” Shapiro said. “Disparities based on race and education and gender are much less with respect to defined-benefit plans than with respect to defined contribution plans.”

Repairing the three-legged stool

Pensions were long regarded as part of the “three-legged stool” of retirement income, along with Social Security and withdrawals from savings. With that leg removed for most workers, much of the discussion at the forum focused on developing different income streams to sustain aging Americans through retirements that, based on actuarial data, will last an average of 20 years or more.

For many peak boomers, the third leg will be continuing to work. According to survey data, “20 percent of peak boomers do not plan to retire, even by 2034,” when they will be 70 to 75 years old, Shapiro said. “This is a reflection, again, of how unprepared large numbers of people are to retire.”

ALI has supported proposals to integrate income annuities into workplace retirement plans, giving employees an option to convert their savings into a regular, pension-like payment. 

Panelists at the forum noted that many workers shy away from annuities because they underestimate how long they will live and are wary about tying up a large chunk of their assets in a long-term income plan.

“It’s tricky because you don’t want to automatically annuitize all of somebody’s wealth,” said William Gale, a senior fellow in economic studies at the Brookings Institution. “In six months they might figure out they didn’t want to annuitize all their wealth and it’s too late. You can’t undo that.”

How workers, employers, financial firms and policy makers address those income challenges will reverberate far beyond the peak boomers’ retirements, Fichtner said. “We’re also now in a peak millennial moment. The largest generation is millennials,” he said. “The problems we’re seeing today with retirement income challenges for current retirees and near retirees will be magnified for those who are coming up 30 years behind. If we don’t do something today to help them, it’s just going to be worse.”

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