Financial Challenges Faced by American Baby Boomers: Are You Affected?

By Hazle Jakubowski

June 23, 2024


Baby boomers, those born between 1946 and 1964, are now at retirement age or nearing it. With this shift into the next phase of life come financial challenges that could pose serious threats to their stability during what should be a time of relaxation and enjoyment. Here is why many baby boomers in America may find themselves in dire straits financially. 
The first major reason stems from a lack of adequate retirement savings. According to Vanguard's How America Saves report, the average account balance for Americans aged 55–64 was $207,874 in 2022. For those over 65 years old, the average balance was slightly higher at $232,710. However, these numbers can be skewed by wealthier retirees with substantial accounts. 
Even using these figures as reference points shows some worrying trends: an account worth $232,710 would only provide around $9k per annum based on the safe withdrawal rate (the '4% rule'). Coupled with an average Social Security benefit amounting to approximately $23k annually, this means that most retired seniors would have just about $32k to spend every year—hardly enough for a comfortable lifestyle. 
Secondly, changes made to Social Security present another hurdle for baby boomers trying to make ends meet post-retirement. The full retirement age has been pushed back to 65 years old, meaning people must either wait longer or settle for less monthly income throughout their lives. 
Moreover, Social Security benefits are no longer exempt from federal income tax if your combined income exceeds certain thresholds that haven't been adjusted along with inflation rates over time, resulting in more seniors having part of their benefits taxed than before—nearly half, according to estimates by the Senior Citizens League and projections from the SSA’s study conducted back in 2015. 
To add further concern, there is also a prediction that funds allocated toward Social Security will deplete in the mid-2030s, leaving beneficiaries receiving roughly four-fifths of what they were initially promised unless Congress steps in to address the issue. 
Lastly, a rise in debt among retirees has seen an increase from around 38% of U.S. households over 65 carrying debt back in the '80s to about 63% nowadays, according to Center for Retirement Research data and the Survey of Consumer Finances’ findings, respectively. 
A variety of debts are burdening this generation, including unpaid medical bills, which reportedly affected nearly four million adults aged over 65 years old, as per the National Council on Aging's report, citing statistics by the Consumer Financial Protection Bureau from two decades ago. This debit adds further strain on their limited income, leading many baby boomers to make sacrifices such as skipping meals or delaying necessary repairs just so they can get by financially. 
For those facing these issues, being proactive is crucial. Downsizing homes, moving into areas with lower living costs, shopping smarter when it comes to choosing Medicare plans, etc. could all help alleviate some pressure on their finances during their retirement years. For others who are still employed, working longer hours and postponing Social Security benefits might be worth considering if they want to secure financial stability later in life. 
It’s clear that Baby Boomers face significant challenges as they move into retirement, but understanding these potential pitfalls can help individuals plan more effectively for this stage of life.


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