Different parts of the generation known as “Boomers” have faced retirement in their own way. New stats signal that younger Boomers, also known as “Late Boomers,” may be facing a worse crisis in retirement than their older counterparts.
According to a new study, Late Boomers have less retirement savings and wealth than older Boomers. While many scenarios could be to blame for this, the Great Recession is likely the overwhelming reason why this group is facing this retirement crisis.
Late Boomers vs. War Babies
First, it’s important to understand the difference between these very different subsets of Boomers. Older Boomers, also often called “War Babies,” are the generations born from 1942 to 1959. Often, when people talk about Boomers in a general term, they are discussing this subset.
Late Boomers, meanwhile, are Americans born from 1960 to 1965. During this era, Beatlemania was birthed. As a result, these Boomers are sometimes called the “Beatlemania Boomers.”
Late Boomers Face Financial Retirement Issues
A new Center for Retirement Research at Boston College paper has revealed that Late Boomers have less retirement savings and wealth than war babies. Researchers of this paper looked at the different subsets of the Boomer generation to see if there are any differences regarding retirement and finances.
To do this, they looked at groups when they were in the same age range. For example, they compared how Late Boomers are retiring now versus when older Boomers retired at their exact same age, yet years ago. They also adjusted for inflation.
Comparing Retirement Wealth
First, researchers took a look at retirement wealth. According to this paper, Late Boomers aged 51-56 had about $280,000 in total retirement wealth. This wealth encompasses the combination of pension benefits, 401(k) retirement plans, and Social Security.
By comparison, older Boomers at this age had more wealth. In total retirement wealth, Mid Boomers had about $332,000. Early Boomers, the War Babies, had about $346,000. From these stats, it appears the older boomers had more wealth than the younger ones.
The Great Recession Hurt Late Boomers
For the most part, it appears that the Great Recession is to blame for putting late boomers in this financial situation. As this recession occurred when this subset of Boomers were in their 40s, it hit them when they were at the peak of their careers.
For many at this time, they were making the most money they ever had — and ever would. Therefore, they did not get the steady income and job opportunities that older Boomers received before the recession hit.
The Loss of Jobs
During the Great Recession, many Late Boomers also unfortunately lost their jobs. This led to the employment rate for younger Boomers to drop by 21% — from 98% to 77% — between the ages of 44 and 50.
Because of the recession, many Late Boomers who lost their jobs didn’t end up returning to the workforce. This likely occurred for a variety of individual reasons. However, by age 57, only 61% of these boomers were working — much less than the more than 90% of Old Boomers who were still working at 55.
Late Boomers Had Lower Earnings after the Recession
This paper also revealed that Late Boomers who did return to the workforce after the recession ended faced difficulties. Most didn’t earn the money they had previously and took home lower earnings.
As a result of this, younger Boomers’ average earnings fell from $79,000 to $69,000 in only a few years during this time. Stats show that these Late Boomers never had the opportunity to recover their higher earnings.
The Loss of Retirement Savings
Perhaps most detrimental is the fact that Late Boomers lost quite a lot of their retirement savings, such as money in their 401(k), during this time. Though late boomers did start out with a lot of retirement wealth, this didn’t last.
There have been many studies done about how 401(k)s were hurt during the Great Recession. Many people also took out early withdrawals during this time. As some Late Boomers never returned to the workforce, they were never able to replenish their savings.
Older Generations Didn’t Have These Difficulties
Clearly, Late Boomers struggled within the job market, with earnings, and with saving retirement money thanks to the Great Recession. Older generations of Boomers didn’t have these difficulties when they were of the same age — as they didn’t have a prolonged recession to deal with.
Therefore, older Boomers were able to both make more and save more when they were in their 40s compared to other Boomers of the same age.
Late Boomers Retired Too Early
While older Boomers worked for a longer time before officially retiring, the same can’t be said about Late Boomers. Many Boomers were pushed out of the workforce during the Great Recession. Others decided to retire early during the first wave of the COVID-19 pandemic.
Many experts are saying these Boomers retired too early, without enough savings. As a result, they have already found themselves facing poverty.
Younger Boomers Could Hurt the Future Economy
Some economists are already warning the public that a slowdown of the economy can be expected, thanks to more Late Boomers retiring — and retiring without enough savings to keep them afloat for the rest of their lives.
A slowdown of economic growth could occur if more government spending is set aside for an incredibly large generation that does not have enough money for themselves.
Younger Generations to Take Care of Boomers
Many analysts have also warned Gen X, Millennials, and Gen Z that they may be the ones who will have to take care of these retiring Boomers in the near future. Younger generations will likely have to be financially responsible for their parents or grandparents.
This strain will be put on the younger generations. But a strain may also appear on the entire healthcare system and economy as younger people work to aid these Boomers.
