Baby Boomers: Worse Off Than Their Parents in Retirement

A Businessweek Online article tells the story of Lee Manchester. Lee is a 61-year-old Baby Boomer. She worked hard her whole life and even tried to start her own business back in the 80’s.

Today, she finds herself with only $120,000 in a 401(k) retirement account and a home that she can’t afford to live in. She rents it out, hoping it will go up in value, and lives in the basement of a friend’s cottage while making $13.50 an hour working at a hotel spa.

Of course, 2008 couldn’t have come at a worse time for someone like Lee. Already well in her 50’s, it was hard to pick up the financial pieces and start a new career after a major recession and through a slow recovery. And like many other baby boomers, she didn’t start saving for retirement until her late 40’s.

Lee’s Father: Sometimes It’s All About Timing

Lee’s father was a long-term, loyal employee who was rewarded with a lifetime pension from the company. He also had Social Security, tremendous buildup of equity in his home, plenty of savings, and the well-timed purchase of a long-term care policy.

Nowadays, people are forced to save for their own retirement security and rely heavily on the success of their investments. Many baby boomers are indeed poorer and less prepared for retirement than their parents.

Our Man Joe: Always Working But Not Saving Much

Joe is a fictional Baby Boomer, but he represents a pattern we have seen time and time again.

The 1980’s: A Working Man

In his 20’s, Joe has worked his way through college and has had a steady job since his graduation.

After the monthly rent bills, paying off college and car loans, and being a typical single social person, there was only ever a little bit left for his 401(k)s retirement at the trail of companies he worked for.

If you added it all up, there’d be a little here and there, but certainly not enough for a sufficient retirement plan.

The 1990’s: A Family Man

In his 30’s, Joe gets married. Whatever was in those 401(k)s becomes a down payment on a starter home. Then the kids come along.

His wife goes from working full-time to part-time to no-time in order to take care of them.

A Toe in the Pool of Financial Planning

Joe dips his toe in the pool of financial planning. Banter around the water cooler and a jolt of fear from falling behind his coworkers motivates him to start planning for the future.

So, Joe gets a little life insurance, has the minimum plus $10 withheld from his paycheck for his 401(k), and decides maybe this year is not the best time to buy a new car.

The 2000’s: Caught on the Hook of Life

When Joe hits his 40’s, it seems that the kids always need new clothes, school supplies, and sports equipment. Activity fees, memberships, vacations, house maintenance, taxes, titles, and vet bills begin to build up, so Joe cuts his own lawn and only goes to Starbucks once a week to save money.

The 2010’s: Joe Wakes Up

Joe turns 50, wakes up, and realizes that while he took care of himself and everybody else, he never really took care of his future. Healthy financial management and retirement planning always took the back seat.

Now he faces paying for his kids’ college and time is running out to build his retirement nest egg. Meanwhile, he doesn’t know how his company will fair and looking for a new job at his age with the same salary and benefits in this economy isn’t exactly promising.

Joe is Not Living in the Age of His Dad

Like Lee’s father, Joe’s dad worked for one company his whole life. Company loyalty meant a livable pension.

Along with Social Security and Medicare, you were safe. How Joe wishes he was his dad! But at 50, Joe only sees for himself a working life without retirement.

At least, not a retirement he’ll be young and healthy enough to enjoy.

Taking Stock

Joe surveys his financial situation. He has $100,000 in his 401(k) retirement, $200,000 of equity in his home, and a bank account that can handle two or three months’ worth of bills. His life will have to change in a hurry.

Don’t Be in Joe’s Situation

No longer able to rely on a pension and never knowing when an economic downturn will rear its ugly head, baby boomers need to save as much as they can, as soon as they can.

The market will always go up and down so it’s crucial to give your savings a chance to work through a few periods of instability.

Saving for retirement, like contributing to a 401(k) retirement account, has to be a priority, because most of us will only have our own funds to count on.

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At Medallion Financial Group, we believe financial planning is about Family. We have been helping families invest in the future since 1987 through a holistic planning approach. We recognize there are a variety of needs when it comes to retirement planning, plan rollovers, annuities, college planning, life insurance options, and investment management. It is easy to get lost in a sea of choices. Our financial advisors help with the basics and beyond to enable our clients to get the education, advice and management they need to retire with confidence.

Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.

We strive to exceed client’s expectations – because we have high expectations of ourselves.