Baby Boomers: Revolutionizing Retirement
Al Waller: Our retirement landscape is evolving due to population aging, increases in longevity, employer benefit trends, and looming reforms to Social Security. It is shifting so rapidly that many of the underlying assumptions about retirement differ across generations in the workforce.
Welcome back to ClearPath – Your Roadmap to Health & Wealth SM. I’m your host, Al Waller. Joining me is Catherine Collinson, founding CEO and president of Transamerica Institute® and its Transamerica Center for Retirement Studies®. In this final episode of a 4-part series about the retirement outlook of four generations currently in the workforce, Catherine will be sharing survey findings about Baby Boomers in the workforce from her team’s new research report Post-Pandemic Realities: The Retirement Outlook of Four Generations.
Before we get started, I want to remind our listeners that we would love to hear from you and get to know what topics you’d like to hear about. Please drop us a line at [email protected].
Catherine, I’ve very much been looking forward to this episode because we’re talking about my generation. For our listeners, it would be great if you start with some background on Baby Boomers.
Catherine Collinson: Baby Boomers were born between 1946 and 1964. They were named after the “baby boom” which was the unprecedented spike in birth rates following World War II.
Winding the clock forward to current day, since 2011, an average of 10,000 Baby Boomers have been turning age 65 everyday, a trend that is expected to continue through 2029.
Al Waller: Given their age, Baby Boomers are nearing and entering retirement – and many have already retired. How many are still working?
Catherine Collinson: Our survey found that 60% of Baby Boomers are fully retired and about one in three are either employed or self-employed (32%). Our report that we’ll be discussing focusses on Baby Boomers who are employed by for-profit companies.
Al Waller: Let’s dig in … When and how do these working Baby Boomers envision retiring?
Catherine Collinson: Baby Boomers have rewritten societal rules in every phase in life, and they are now revolutionizing retirement. They’re abandoning the long-standing notion that retirement is an abrupt end to full-time work followed by full-time leisure. Instead, they envision it as a flexible transition with continued work but more free time for personal pursuits.
Seven in 10 (71%) expect to retire after age 65 or do not plan to retire – and more than half plan to continue working at least part-time in retirement (55%). Most cite financial reasons for doing so (83%), yet many also cite healthy aging-related reasons (77%) such as wanting to stay active, keeping their brain alert, enjoying what they do, and having a sense of purpose.
Al Waller: That is really impressive!! And that leads me to wonder about their financial situation and retirement preparations. How are they doing?
Catherine Collinson: Baby Boomers have been traversing the shifting retirement landscape since entering the workforce decades ago. Many were already mid-career when traditional defined benefit pension plans began vanishing from the retirement landscape, which was about the same time that 401(k)s came about. In essence, Baby Boomers have not enjoyed the same time horizon to save in employee funded plans, like 401(k)s, as the generations that have followed them.
Today, 85% percent of Baby Boomer workers are saving for retirement in an employer-sponsored 401(k) or similar plan and/or outside the workplace. They began saving at age 35 (median). Those participating in a 401(k) or similar plan contribute 10 percent (median) of their annual pay. Ten percent may sound like a lot… However, it may not be enough given their age and proximity to retirement. They may need to be saving even more.
When we looked at total household savings in retirement accounts, Baby Boomer workers have saved $289,000 – that's the estimated median. On one hand, $289,000 may sound like a lot of money. However, they will have to make that last through a retirement that could last 20 or 30 or more years. So, in some ways it sounds like a lot – in other ways, if they must make those savings last for 2 decades or more, it may not go that far.
Al Waller: It’s no wonder that so many are planning on working longer and retiring at an older age. What are their expectations about Social Security?
Catherine Collinson: Four in 10 Baby Boomer workers expect Social Security to be their primary source of income in retirement (41%) which may prove difficult to live on.
I’d like to point out that their visions of working longer and retiring at an older age gives them more time to earn income and build their savings – and it also can help them continue building an earnings history which can enhance their Social Security benefits. Also, if they can hold off on receiving Social Security benefits until age 70, they can increase their monthly benefits.
Al Waller: I’m concerned that some Baby Boomers may be overly optimistic about their ability to keep working in older age. In my own experience, I’ve had a number of friends who retired sooner than planned. Are Baby Boomers fully considering risks that could undermine their ability to achieve success?
Catherine Collinson: I share your concerns. I’m afraid that many are vulnerable.
We asked Baby Boomer workers what steps they are taking so they can work as long as they want and need. Only seven in 10 say they are focused on staying healthy (71%), and slightly more than half are keeping their job skills up to date (51%). Over the years, our research on retirees has found they often retired sooner than planned, either due to personal health reasons or employment-related issues like losing a job and not being able to find work.
Al Waller: Especially given the risks involved, it seems critical that Baby Boomers have contingencies in their financial plans. Hopefully, they’re covering their bases on this front. What did your survey find?
Catherine Collinson: I wish I had better news, but I'm going to reframe this as being an opportunity. Many are inadequately planning. Fewer than three in 10 have a financial strategy for retirement in the form of a written plan (27%), and only 34% have a backup plan for income in the event they are forced into retirement sooner than expected.
Al Waller: Catherine, let’s wrap up our conversation with some specific tips for our Baby Boomer listeners. What can they do to strengthen their situation?
Catherine Collinson: In a nutshell, my overarching advice is, “Do your homework.” I’ll emphatically leave you with these three tips which can tremendously influence your outcomes:
- Learn as much as possible about Social Security. Only 23% of Baby Boomer workers say they know “a great deal” about it. By learning about claiming strategies, you can optimize your monthly benefits. To learn more, check out our podcast episode explaining Social Security and visit www.socialsecurity.gov.
- Learn as much as possible about Medicare. Only 18% of Baby Boomer workers say they know “a great deal” about it. Medicare has many options with different levels of coverage, pros and cons, and, of course, different price tags. With Medicare A, B, C, D, and even more letters, it’s commonly referred to as the “Medicare alphabet” for good reason. There’s added options and complexity for workers aged 65 and older who may still be covered by their employer’s plan. To learn more, check out our podcast episode explaining Medicare and visit www.medicare.gov.
- Develop a specific retirement income strategy that considers income from continued work, when to claim Social Security, and when and how to draw down savings from qualified retirement accounts, such as 401(k)s and IRAs – and from other investments. You’ll want to make sure your savings lasts your lifetime. Learn about annuities and other guaranteed income products and whether they might be right for you. If you need help, start by consulting with your employer’s retirement plan provider, a financial services institution, or a professional financial advisor.
It is also critical to safeguard your health, keep your job skills up to date, and create short-term and long-term financial plans.
Most of all, keep your eye on the prize – so you can fully enjoy your retirement when it arrives.
Al Waller: Thank you, Catherine, for your perspectives and insights on this topic. Where can people go to learn more?
Catherine Collinson: If you’re interested in reading the report that we’ve been discussing, Post-Pandemic Realities: The Retirement Outlook of Four Generations, please visit our website at www.transamericainstitute.org.
Al Waller: Listeners, check out the other episodes in this four-part series about how different generations in the workforce are preparing for retirement. We also discuss Generation Z, Millennials, and Generation X.
Until our next episode, stay safe, be well, and thanks for listening.
ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being.
You can find our weekly podcast on WYPR’s website and mobile app, wherever you get your podcasts, and at transamericainstitute.org/podcast.
ClearPath – Your Roadmap to Health & Wealth is produced by Transamerica Institute with assistance from WYPR.
The information provided here is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance.
