The great retirement wave of baby boomers is just around the corner. According to the Census Bureau, 44% of baby boomers are of retirement age, with millions more soon to join them. In 2030, the largest generation retiring will all be over 65 years old.
The general assumption is that baby boomers will have a comfortable retirement. With their accumulated wealth from three decades as America's dominant economic power, boomers are sailing into their golden years, sipping margaritas on cruises and pampering themselves in their well-appointed homes. After all, Federal Reserve data shows that while the 56 million Americans over 65 make up just 17% of the population, they own more than half of America's wealth – $96.4 trillion.
But there's a flaw in the baby boomers' sunny retirement narrative: Many older Americans are unprepared for their later years. Yes, many members of the generation are invited, but many others are not. As with any age cohort, there is significant wealth inequality among retirees – and this has only gotten worse over the last decade. Despite owning more than half of the country's wealth, many baby boomers don't have enough money to cover long-term care costs, and 43% of those ages 55 to 64 had no retirement savings at all in 2022. That was 30% of the year People over 65 were economically insecure, meaning they earned less than $27,180 for a single person. And with younger baby boomers less financially prepared for retirement than their older siblings, the problem is bound to get worse.
As baby boomers continue to drop out of the workforce, this will place a strain on the health care system, government programs and the economy. That means more young people will be financially responsible for their parents, more government spending will be allocated to the elderly, and economic growth could slow.
“The system has failed to think long-term,” Rita Choula, executive director of the AARP Public Policy Institute, told me. And this failure falls on the shoulders of young people.
Not all boomers are rich
There's no denying that some boomers will enjoy a comfortable retirement. The Fed's most recent survey of consumer finances found that the average net worth of people ages 65 to 74 was $1.8 million, the richest age cohort in the survey. But that total masks the fact that the financial outlook for many American retirees is grim.
Average net worth can be inflated if only a few people own a lot of wealth. A more accurate measure is median net worth, which prevents the ultra-rich from distorting the picture. In the Fed's survey, half of Americans ages 65 to 74 said they had less than $410,000 for Social Security and retirement funding – much of which may be tied up in real estate. The average retirement account for this age group is just $200,000 — meaning half of 65- to 74-year-olds have even less saved. Given these numbers, it is clear that a significant portion of baby boomers are unprepared for their final years. In fact, the National Council on Aging estimates that 17 million people over 65 are considered economically insecure.
The average income for people age 75 and older is $49,000, including an average Social Security benefit of $21,162 per year. If you are the sole owner of your home, which is the case for 81% of people over 75, you could lead a comfortable life with this income. However, if they live in a more expensive area or require outside help with everyday activities, their income may quickly become inadequate. And that only applies to people in the middle of the wealth distribution.
Even the best retirement plans often go awry as you get older. I recently wrote about my husband's grandmother, who ended up in a nursing home as she grew older. The care was essential to giving her a good life, but it devoured the $250,000 nest egg she had amassed. Your experience is not unique; The average national cost of homemaker services is $163 per day, and the average cost of a semi-private room in a nursing home is $94,900 per year, the Genworth Long-Term Care Survey found. None of these costs are covered by Medicare. And as money is withdrawn from savings to pay for care, the income generated from that supply becomes smaller and smaller.
The rising cost of care and the precarious financial circumstances of many older adults have led many baby boomers to work longer hours, delay care, or move into a Medicaid-funded nursing home sooner than they would like. Instead of a final act that allows them to enjoy life, many baby boomers face a tough road ahead – and their younger family members will be forced to carry the burden.
The sandwich generation
Stevie Kuenn, a marketing executive in Chicago, has a lot on her plate. In addition to her full-time job and the responsibility of raising her 12-year-old daughter, Kuenn has recently started helping care for her 91-year-old mother-in-law. She said her family was happy that her mother-in-law had saved some money, but the responsibility of caring for her still weighed on her. For years, her mother-in-law lived hundreds of miles away in Ohio. In an emergency it was often difficult to help. They once had to end a family vacation early to help during a health crisis. Another time, Kuenn returned home early from a business trip so she could care for her daughter while her husband traveled to Ohio. The back and forth eventually became too much and Kuenn brought her mother-in-law closer to the family in Chicago. But things like dealing with health care continue to surprise her.
“There is no safety net,” Kuenn said of elder care. “We were not prepared for the burden of making sure their Medicare was renewed.”
We're talking about people who don't put money into their retirement or their children's education. Rita Choula, senior director at the AARP Public Policy Institute
Kuenn belongs to the so-called sandwich generation, i.e. people who care for aging parents and small children at the same time. In a 2021 Pew survey, 23% of Americans said they have both a parent over 65 and a child they are supporting. And more and more people are juggling those caregiving responsibilities with a job: AARP's Choula told me that 60% of family caregivers work full- or part-time jobs while providing an average of 20 hours of unpaid care per week. For people like Kuenn, the demands of Girl Scout cookie deliveries, work visits, Medicare forms and doctor's appointments can be emotionally and financially taxing.
“If we look at it from an economic perspective, sometimes it becomes almost impossible,” Choula said of this juggling act. As a result, some carers, often women, leave the workforce. A 2019 survey by AARP and the National Alliance for Caregiving found that 15% of caregivers reported reducing their hours in the past 12 months, 14% reported taking a leave of absence, and 11% reported either quitting or have taken early retirement. This loss of income has a downstream effect. Choula said these caregivers spent an average of $7,200 out of pocket each year to support their loved ones. And the more people retire, the worse the problem becomes.
“We’re talking about people who don’t put money into their pension or their children’s education,” she said. “This can have long-term, generational impacts on wealth, particularly when we look at communities of color.”
A blow to the economy
As many families begin to figure out how to care for their baby boomer relatives as they age, the effects of the graying of the “me” generation will also ripple through society as a whole.
On the one hand, a growing proportion of the older cohort – an estimated 6.6% of those aged 55 and over – do not have a spouse or children to care for them. But even for people with assistance, the lack of care infrastructure will make their retirement years less than pleasant. There are currently about 15,000 long-term care facilities in the United States, and analysts at SeniorLiving.org estimate that number will need to increase by 20% over the next six years. But the availability of nursing homes is moving in the opposite direction. Since 2020, 579 nursing homes have closed, resulting in more than 45,000 fewer nursing home beds than before the pandemic, the American Health Care Association found. As demand increased, more than half of nursing homes reported having to turn people away, the organization found.
Without more caregivers and nursing homes, America's retirees will have to rely on their financially struggling Millennial children and Gen Z grandchildren
One reason long-term care is scarce and expensive is because it is labor-intensive. It is hard, responsible and sensitive work, and the industry is short of staff. In 2023, 77% of nursing homes reported staffing shortages. It has long been an attractive field for immigrants, and the good news is that immigration has increased recently after the pandemic receded. In 2022, the Department of Homeland Security reported that 1 million immigrants arrived legally in the U.S., an increase from 2020 and 2021. But without more caregivers and nursing homes, America's retirees will become dependent on their financially struggling Millennial children and Gen Z grandchildren be.
In general, the government needs to provide more spending for older people. Whether it's maintaining current levels of Social Security benefits, expanding county guardianship programs to take care of nursing home residents who have no friends or family, or simply losing people's tax revenue , who are no longer working – the growing number of retirees poses a financial burden that America has not prepared for. The loss of productivity and higher tax rates will place a strain on the economy that will be difficult for working-age people to overcome.
Federal programs like Social Security, Medicare and Medicaid are critical for retirees, but they are far from enough, especially as the population ages. Without more government support, the burden of caring for the elderly falls on younger family members who spend their own time and money raising their own families. If the U.S. doesn't figure out how to adapt to its aging economy, young people will end up taking on more and more work.
Ann C. Logue is an author specializing in economics and finance. Her most recent book is Options Trading. She lives in Chicago.