Why Baby Boomers are Eating Through Their Retirement Savings Quickly — Tips to Preserve Your Nest Egg
Baby boomers, those born between 1946 and 1964, are facing a retirement crisis. With an average of only $120,300 saved for retirement, according to Northwestern Mutual’s Planning & Progress Study 2024, many boomers are finding themselves eating through their savings at a rapid pace. This is a troubling statistic, especially considering that most boomers believe they will need $990,000 in savings to retire comfortably.
So why are boomers depleting their nest eggs so quickly? Here are three reasons why, and some tips on how to preserve your retirement savings:
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They got a late start: The typical boomer and older generations started saving for retirement at age 37, according to Northwestern Mutual’s study. This late start means that many boomers may not have enough saved up to live comfortably in retirement. As a result, they may be dipping into their savings at a faster pace to cover immediate bills. Additionally, some boomers may have relied too heavily on Social Security to replace their retirement income, only to find out that it will only cover about 40% of pre-retirement earnings.
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Some were forced to retire: Some boomers put off retirement savings with the expectation that they would catch up later in their careers. However, some older workers may be forced into retirement against their will due to health problems, job cuts, or outdated skill sets. This can wipe out years of potential savings and derail retirement planning, leading to a faster depletion of savings.
- High cost of health care: Fidelity reports that the typical 65-year-old in 2023 could expect to spend an average of $157,500 on health-care costs throughout their retirement, assuming they’re enrolled in Medicare. With limited savings to begin with, many boomers are finding that health-care expenses are forcing them to blow through their cash reserves at a rapid pace.
To preserve your retirement savings, consider working with a financial adviser to establish a safe withdrawal rate given your balance and expenses. You may also want to consider boosting your retirement income with part-time work and maintaining a stock portfolio to add to your savings even as you’re tapping into them.
In conclusion, it’s important for baby boomers to take steps to preserve their retirement savings and ensure a comfortable retirement. By understanding the reasons why they may be eating through their savings quickly and taking proactive steps to mitigate these factors, boomers can better protect their nest eggs for the future.
