Fred Leamnson, Wealth of Geeks
The last of 73 million baby boomers turn 65 in the next seven years. 92% of retirees over the age of 65 draw on Social Security to supplement their retirement savings, according to a recent Boston University review.
AARP reports one in five retirees rely on Social Security for 90% of their income. Meanwhile, the one-time retirement safety net is rapidly draining. One economist estimates it’s more than 65 trillion dollars in the hole.
This paints a bleak picture of what pensioners can expect as they drift into modern retirement. Too many working Americans have not saved enough to retire comfortably, which will eventually lead to higher poverty rates.
The theme of retirement has given us many tropes over the years: the retired outlaw (“The Godfather”), passing the torch (“The Godfather Part II”), or mandatory unretirement (“The Godfather Part III”). However, for the current older generation, a new one may yet emerge: the “never retiring” trope.
“People are retiring, some quite early, and retiring with very little,” Professor of Economics at Boston University, Laurance Kotlikoff, says in the report. “Baby boomers just don’t have enough savings.”
—————
Too little, too late
The Federal Reserve ‘s latest research shows that while 72% of non-retired adult Americans have started saving for their pensions, 28% of those surveyed have not. Just over half of those with retirement savings use defined contributions (DC) such as a 401(k), meaning a slim minority are investing in saving methods outside the formal route.
There is a larger problem on the horizon, however: Social Security benefits currently have a 13-year shelf life in their current form.
—————
Falling birthrates and extended visits
As early as 2010, the Social Security Administration (SSA) was a harbinger of entitlement doom, reporting that Social Security project costs would increase so much by 2037 that tax revenue would only cover 75% of benefit allocations. While some may attribute this solely to an aging population, it is driven by a falling birthrate. U.S. births dropped from an average of 71 per 1,000 people in 1990 to 56 per 1,000 in 2020 — a 21% drop.
The importance of investing in one’s future has never been more timely.
This negative outlook may reflect some people’s decision to leave retirement and return to the workplace. A report from the American Association of Retired Persons (AARP) in 2023 detailed why more retirees are returning to the job market.
Motivating factors for this change differ, though a retiree’s gender and marital status may show their reasons for doing so. Female and single retirees choose to return to work for extra income, while male “unretirers” aim to improve their social connections.
—————
On the fringe with benefits
People are not necessarily returning to the same job. Thankfully, there are a multitude of side hustles on the market, and the aging community has many opportunities to bolster their savings plans. However, one must be careful not to jeopardize their Social Security plan.
For instance, anybody below full retirement age who has drawn from their Social Security benefits risks penalty deductions from their Social Security payments should they increase their annual salary above $21,240 (the threshold as of 2023).
There is good news for those participating in the savings battle ahead — especially younger generations. Many states now demand financial literacy classes in school curricula. Gen-Z savers have far more finance-based support at their disposal than previous cohorts. Of course, early engagement with saving money and the eventual compound interest growth leads to a more secure financial future.
—————
The power of the pen
Saving for one’s future is even achievable on minimum wage, especially with the gig economy to help supplement the usual career-related income. U.S. News & World Report cites MoneyMindful Personal Finance Coaching owner Linda Matthew, who believes a positive saving mindset starts with a written plan. “The act of putting pen to paper somehow gets us engaged in the process, and then possibilities begin to emerge.”
A recent Investment Company Institute study found young adults were more confident about their financial prospects than expected. In 2022, Gen Z and millennials shared a much higher percentage of DC savings than Gen-X savers in 1989, which presents a paradox. One can only imagine Gen-X investors’ financial footing today had they been exposed earlier on, though they did benefit from decades of mostly bullish market activity.
—————
Millennials are now forty
Nevertheless, millennials’ net worth is underwhelming compared to Gen-X contemporaries. Business Insider reported in 2023 that the average millennial in America is suffering detrimental student debt and childcare costs, which hamper savings. With this generation’s alumni now hitting their forties, preparing for the future is much harder than for past generations — especially their grandparents’ more fiscally robust ones.
Steve Adcock, author of “Millionaire Habits: How to Achieve Financial Independence, Retire Early, and Make a Difference by Focusing on Yourself First,” is an entrepreneur and writer who achieved financial freedom at 35. In his view, technology is the ideal vehicle for financial discipline. His advice for young people is to embrace automation in their financial routine, namely using an employer’s payroll system — something easily learned by younger, more tech-literate generations.
—————
Paving the way to financial freedom
“I think the key to saving for young people is using automation,” says Adcock. “A great tactic is to use your employer’s payroll system to automatically fund your long-term investments, like the traditional 401(k) and Roth IRA.” For example, starting a Vanguard-targeted retirement account with an automatic bank transfer function will alleviate any need for time-consuming activity.
—————
Automation is key
Nothing beats indecision more than the electronic delegation of one’s leftover funds, so becoming familiar with investment tech is key to avoid procrastination. “It’s practically automatic wealth overtime,” Adcock concludes. “The key is to remove the element of discipline with your savings and investment strategies: always use the power of systems when you can.”
AARP reports one in five retirees rely on Social Security for 90% of their income. Meanwhile, the one-time retirement safety net is rapidly draining. One economist estimates it’s more than 65 trillion dollars in the hole.
This paints a bleak picture of what pensioners can expect as they drift into modern retirement. Too many working Americans have not saved enough to retire comfortably, which will eventually lead to higher poverty rates.
The theme of retirement has given us many tropes over the years: the retired outlaw (“The Godfather”), passing the torch (“The Godfather Part II”), or mandatory unretirement (“The Godfather Part III”). However, for the current older generation, a new one may yet emerge: the “never retiring” trope.
“People are retiring, some quite early, and retiring with very little,” Professor of Economics at Boston University, Laurance Kotlikoff, says in the report. “Baby boomers just don’t have enough savings.”
—————
Too little, too late
The Federal Reserve ‘s latest research shows that while 72% of non-retired adult Americans have started saving for their pensions, 28% of those surveyed have not. Just over half of those with retirement savings use defined contributions (DC) such as a 401(k), meaning a slim minority are investing in saving methods outside the formal route.
There is a larger problem on the horizon, however: Social Security benefits currently have a 13-year shelf life in their current form.
—————
Falling birthrates and extended visits
As early as 2010, the Social Security Administration (SSA) was a harbinger of entitlement doom, reporting that Social Security project costs would increase so much by 2037 that tax revenue would only cover 75% of benefit allocations. While some may attribute this solely to an aging population, it is driven by a falling birthrate. U.S. births dropped from an average of 71 per 1,000 people in 1990 to 56 per 1,000 in 2020 — a 21% drop.
The importance of investing in one’s future has never been more timely.
This negative outlook may reflect some people’s decision to leave retirement and return to the workplace. A report from the American Association of Retired Persons (AARP) in 2023 detailed why more retirees are returning to the job market.
Motivating factors for this change differ, though a retiree’s gender and marital status may show their reasons for doing so. Female and single retirees choose to return to work for extra income, while male “unretirers” aim to improve their social connections.
—————
On the fringe with benefits
People are not necessarily returning to the same job. Thankfully, there are a multitude of side hustles on the market, and the aging community has many opportunities to bolster their savings plans. However, one must be careful not to jeopardize their Social Security plan.
For instance, anybody below full retirement age who has drawn from their Social Security benefits risks penalty deductions from their Social Security payments should they increase their annual salary above $21,240 (the threshold as of 2023).
There is good news for those participating in the savings battle ahead — especially younger generations. Many states now demand financial literacy classes in school curricula. Gen-Z savers have far more finance-based support at their disposal than previous cohorts. Of course, early engagement with saving money and the eventual compound interest growth leads to a more secure financial future.
—————
The power of the pen
Saving for one’s future is even achievable on minimum wage, especially with the gig economy to help supplement the usual career-related income. U.S. News & World Report cites MoneyMindful Personal Finance Coaching owner Linda Matthew, who believes a positive saving mindset starts with a written plan. “The act of putting pen to paper somehow gets us engaged in the process, and then possibilities begin to emerge.”
A recent Investment Company Institute study found young adults were more confident about their financial prospects than expected. In 2022, Gen Z and millennials shared a much higher percentage of DC savings than Gen-X savers in 1989, which presents a paradox. One can only imagine Gen-X investors’ financial footing today had they been exposed earlier on, though they did benefit from decades of mostly bullish market activity.
—————
Millennials are now forty
Nevertheless, millennials’ net worth is underwhelming compared to Gen-X contemporaries. Business Insider reported in 2023 that the average millennial in America is suffering detrimental student debt and childcare costs, which hamper savings. With this generation’s alumni now hitting their forties, preparing for the future is much harder than for past generations — especially their grandparents’ more fiscally robust ones.
Steve Adcock, author of “Millionaire Habits: How to Achieve Financial Independence, Retire Early, and Make a Difference by Focusing on Yourself First,” is an entrepreneur and writer who achieved financial freedom at 35. In his view, technology is the ideal vehicle for financial discipline. His advice for young people is to embrace automation in their financial routine, namely using an employer’s payroll system — something easily learned by younger, more tech-literate generations.
—————
Paving the way to financial freedom
“I think the key to saving for young people is using automation,” says Adcock. “A great tactic is to use your employer’s payroll system to automatically fund your long-term investments, like the traditional 401(k) and Roth IRA.” For example, starting a Vanguard-targeted retirement account with an automatic bank transfer function will alleviate any need for time-consuming activity.
—————
Automation is key
Nothing beats indecision more than the electronic delegation of one’s leftover funds, so becoming familiar with investment tech is key to avoid procrastination. “It’s practically automatic wealth overtime,” Adcock concludes. “The key is to remove the element of discipline with your savings and investment strategies: always use the power of systems when you can.”
