Baby boomers may have a pension problem - April 24, 2019

Baby boomers may have a pension problem

While millennials are planning for early retirement with a will of iron, baby boomers are facing serious pension problems. According to a new American study, almost half of them don’t have any savings for their retirement. This is especially scary, knowing that they were the golden generation of the US. They just made serious mistakes.

A week after we wrote about how millennials are preparing for their early retirement (FIRE – the thing that leads to early retirement), a new study came out about the serious pension problems of elders, especially baby boomers. The paper of Insured Retirement Institute underlines several mistakes baby boomers make with some interesting (and scary) statistics about them.

The lucky generation?

Baby boomers are members of the generation born from right after World War II to 1964. After the war, (almost) everything seemed bright. This was a generation of optimism. They were helped by a huge and lengthy global economic boom. This generation had more children than any other ever before, hence the name baby boomers.

MarketWatch also covered the study and provided some very interesting insights for this generation in the US. They mention that members “were sent to college, and grad school” for cheap or even for free. They found work easily and “they were able to accumulate stocks, bonds and real estate just as prices began to skyrocket”. They supposed to have a pretty simple retirement compared to people born later.

But… they have serious problems

According to the study, their pensions are in a grim state. As they found out, only 55% of boomers “have any money saved for retirement”, while 23% of them have no savings at all. Knowing this, it’s not surprising that only 24% of them plan to retire before the age of 65 and 29% between ages 65-69. A huge majority plans to postpone their retirements by far, while 29% don’t plan to retire at all.

Reasons for Postponing Retirement

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These problems are sadly not that surprising, knowing that pensions systems have serious problems around the world. That’s a topic we often revisit (see: A pension crisis seems inevitable and Retirement age is rising globally), as it’s becoming more and more important to plan our future and retirement with great care.

They make other mistakes

How come they have such serious problems? Well, mostly they didn’t plan their retirement well enough. Often, they don’t set up savings targets at all, meaning they don’t realize how much money they need until it’s too late. This also leads to serious underestimation of funds needed to have a decent pension, especially because people tend to miscalculate how expensive health care becomes when they get old.

They don’t talk to professionals either: at least 25% of them didn’t have advisors. Although many of them did talk to experts, they didn’t set up goals. Then, there are those who lack discipline: 17% of the people asked in the survey had savings for retirement, but they spent it on other things. And as we all know, discipline is one of the most important things in investments.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.