My parents are in the baby boomers category (born between 1946 and 1964) which make up over 25% of the U.S. population. This age group was the largest generational group in U.S. history (about 77 million) up until the millennial generation recently surpassed them. They have and continue to have a significant impact on the economy. Here are 11 baby boomers retiring statistics you may not know.
11 Baby Boomer Retirement Facts
1) Thousands of baby boomers are reaching retirement age every day
Did you know that an average of 10,000 baby boomers are turning 65 each day (source AARP)? This means that nearly seven boomers are turning 65 every minute. This trend is expected to continue into the 20s & 30s.
2) Thousands of baby boomers support their adult children
Many baby boomers end up decimating their finances by shelling out money on their adult kids. Not Debt Free Dr! As a parent now with two young boys, I completely understand how it feels to want to help. Parents typically have the best of intentions, but can put their family in peril when they choose to put kids’ college education ahead of retirement needs.
If you’re a Dave Ramsey follower, you’ve probably heard of his 7 Baby Steps:
- Baby Step 1 – $1,000 to start an Emergency Fund
- Baby Step 2 – Pay off all debt using the Debt Snowball
- Baby Step 3 – 3 to 6 months of expenses in savings
- Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
- Baby Step 5 – College funding for children
- Baby Step 6 – Pay off home early
- Baby Step 7 – Build wealth and give!
*Notice that saving for kid’s college (Baby Step 5) starts AFTER beginning to invest 15% of income.
3) U.S. states boomers flock to and those they avoid
States with baby boomer concentrations greater than 35%:
- Maine
- New Hampshire
- Montana
States with the lowest concentrations of baby boomers:
- California
- Texas (I was surprised due to no state income tax)
- Georgia
- Arizona
- Utah
4) Boomers are pretty glum
According to a survey taken by the Pew Research Center, it appears that the U.S. baby boomers are pretty glum. Take a look at their graph below.
Fully 76% of those 65+ say they are dissatisfied with the way things are going in the country today.
Boomers are also more downbeat than other adults about the long-term trajectory of their lives and their children’s.
According to a Pew Research survey,
- 21% say their own standard of living is lower than their parents’ was at their current age
- among all non-Boomer adults, just 14% feel this way
The same survey found that 34% of Boomers believe their own children will not enjoy as good a standard of living as they themselves have now; by contrast, just 21% of non-Boomers say the same.
5) U.S. Baby boomers control more than two-thirds of disposable income
Boomers beware! Don’t get scammed. The secret is out. One of the most concerning baby boomer retiring statistics comes from others knowing that:
- Boomers are projected to have 70% of all U.S. disposable income over the next five years
- Boomers will inherit about $15 trillion in the next 20 years
While researching “boomer” info for this post, I ran across an internet forum for people that were specifically targeting boomers. Now, there’s nothing wrong with marketing to a specific target market, it only turns wrong when advertisers don’t have their BEST interest in mind.
This forum listed facts about the number of retirees that had paid for homes and how they should be targeted to invest in “reverse mortgages” to pitch their products and services.
Again, as long as consumers are well informed to the point that they can make an educated decision, I’m ok with it. What I’m NOT OK is with companies praying on their victims using “scare tactics.”
If you want to read about specific examples of older folks getting scammed, check out the AARP’s blog post, “Meet the Faces of Fraud: What you can learn from these six scams that ripped off older Americans.”
6) More boomers are applying for reverse mortgages
In 1999, only 6% of reverse mortgages applicants were from leading edge baby boomers, aged 62 to 64. Today, that number has dramatically increased to over 21% of applicants (1 out of 5).
Is 62 too young to take out a reverse mortgage? Stephanie Moulton, an assistant public policy professor at Ohio State University and a former reverse mortgage counselor for AARP says this rising trend, “Spells trouble.”
If they don’t have other retirement assets and they’re spending down the equity in their house, these “young” reverse mortgage borrowers are putting themselves at great risk down the line.
Here’s something else alarming about this situation:
Many young borrowers are taking out reverse mortgages for the wrong reasons. Instead of using the extra money to live out their final years in comfort in their family home, the money is going to much-needed cash to cover short-term financial shortfalls. Which leads us to the next stat…
7) Baby boomers are not well-prepared for retirement
The conclusion of the 2017 Retirement Income Literacy Survey by the American College of Financial Services wasn’t too good. It stated that roughly three out of four people between the ages of 60 and 75 could not pass a quiz on basic retirement income concepts.
The majority of the questions missed dealt with:
- Social Security
- investing
- long-term care
Fewer than 1% aced the quiz, results that David Littell, the retirement income program co-director at The American College described as “alarming.”
The median 401(k) balance of someone in the 55-64 age group is $177,805, according to a report from Vanguard. Using the commonly used “4% rule” of retirement, this translates to sustainable income of just $7,112 per year in retirement.
Even when combined with Social Security income, this isn’t nearly enough for most retirees to sustain their quality of life. Worse yet, 45% of baby boomers report having no retirement savings whatsoever.
8) Boomers are unfamiliar with investment basics
Here’s a few more stats from the Retirement Income Literacy Survey discussed above:
- 80% understood mutual fund investing was less risky than single stock investing
- Most didn’t realize small company stocks generally deliver bigger returns than other types of stock and bond investments
- 30% knew an exchange-traded fund (ETF) generally has lower fees than an actively managed fund.
- Many didn’t understand how changes in interest rates affect the value of bonds(as interest rates rise, bond fund values fall.)
9) Boomers are heading into retirement with loads of debt
According to an article on Nasdaq, many boomers are carrying a bigger debt burden into retirement. The article cited stats from the Federal Reserve Bank of New York that shows per-capita debt among 65-year-olds increasing by 48% between 2003 and 2015.
Debt held by Americans aged 50-80 increased by 59% from 2003 to 2015 https://t.co/EVx3ojT9OH pic.twitter.com/vqHUSiIwmE
— New York Fed (@NewYorkFed) February 12, 2016
They are advised to evaluate their debts to curb the impact of their loans on their nest egg by checking the interest rate and tax treatment of their loans, as well as the reason why they incurred the debt.
10) Many boomers don’t know how to maximize social security benefits
40% of boomers responding to an investment survey weren’t aware their benefits would increase for every year they wait to claim between age 62 and 70. You can throw my parents in the group too.
They, like many other boomers, think that signing up for their benefits as soon as they can is the best policy.
- One in three Americans over 65 relies on Social Security benefits alone.
- Three out four claim benefits when they turn 62 out of financial necessity.
- 2010 Social Security paid out more in benefits than it received in tax payments.
- In 1950, 16 workers paid for each retiree’s SS benefit; In 2010, it was 3.3 workers and by 2025 it’s projected to be two workers.
One easy way to maximize benefits to to delay claiming Social Security for 2-3 years. (They’ll get an extra 8% for every year they wait to claim until age 70.)
11) Clueless about their current investment holdings
After both sets of grandparents passed away, I decided to sit down with my parents and talk about…money. Specifically, what type of investments their inheritance from their parents were in and what their current investments look like.
I admit, it was a bit awkward to get the conversation going, but I’m glad I did. My parents are fantastic, hard working and have provided all a blue collar, middle class family can. My brother and I never wanted for anything.
So I wanted to have a conversation to give back and help in any way I could with the money knowledge I’ve gained during the process of becoming debt-free.
My parents, like a third of boomers, admitted they had no idea how big (or small) a role stocks, mutual funds and bonds should play in their overall retirement portfolio. Many of their investments were tied up into mutual funds with high turnover and large annual fees. They assured me that they were making money according to each monthly statement they received, but they couldn’t tell me how much they were paying in expenses.
Confusion here is understandable because, unless boomers have basic investment knowledge, it’s tough to find the answers.
How you can help
I encourage others (with investing knowledge) to bite the bullet and sit down with parents, grandparents, other relatives or friends that can use basic financial help. You can’t imagine the load you’ll take off of them.