Many members of the Baby Boom generation have retired, and many of those who remain in the workforce are not far off from following suit. But many of those individuals are less financially prepared for retirement than one may expect, says a recent study. 
In “What Happened to Late Boomers’ Retirement Wealth?” Anqi Chen, Alicia H. Munnell, and Laura Quinby use data from (1) the Health and Retirement Study to look at patterns of wealth accumulation and factors affecting the wealth of late Boomers, and (2) the Survey of Consumer Finances (SCF) for insights on late Boomers’ experiences during their time in the workforce.
Chen is the assistant director of savings research at the Center for Retirement Research at Boston College. Munnell is a Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management and serves as the director of the Center for Retirement Research at Boston College. Quinby is a senior research economist at the Center for Retirement Research.
Wealth Holdings
Chen, Munnell, and Quinby cite the HRS, a biennial survey conducted by the University of Michigan of U.S. households older than age 50 which gauges wealth from Social Security, pension plans, and defined contribution plans.
They note that the HRS for 1992-2016 shows that pension plan revenue comprised a shrinking proportion of Boomers’ wealth—the highest proportion for early Boomers, a lower proportion for mid Boomers than for the early Boomers, and the lowest proportion for late Boomers. Revenue from DC plans showed the same pattern. And Social Security comprised the highest proportion of wealth for all three groups, and the highest proportion for late Boomers. And overall, the lowest amount of wealth among the Boomer groups was held by the late Boomers.
Factors in Play
Chen, Munnell, and Quinby attribute late Boomers’ situation to a number of factors.
The Great Recession. Timing is everything, it has been said, and that maxim certainly holds true regarding late Boomers’ retirement savings vis-à-vis the Great Recession.
The researchers note that the late Boomers’ prospects were not always as dim, and cite statistics from the Survey of Consumer Finances, 1989-2019, prepared by the U.S. Board of Governors of the Federal Reserve System. It shows that until they approached age 50, the late Boomers had higher DC assets than did earlier groups at the same age.
But then came the Great Recession. They say that the “economic calamity” hit the late Boomers “particularly hard” and that their employment rate fell sharply and did not recover—in part because at least some of them remained permanently unemployed.
Further, Chen, Munnell, and Quinby note, many unemployed late Boomers likely took money from their retirement accounts in order to support themselves.
And since late Boomers were closer to retirement age during and after the Great Recession, they had and have less time than younger generations to replenish their retirement funds and recover from the recession’s effects.
Wages. The researchers also note the SCF shows that late Boomers’ average earnings stopped growing when they reached their 40s—and then fell.
Demographics. The researchers argue that there also are demographic reasons for the late Boomers’ poorer financial prospects in retirement.
Chen, Munnell, and Quinby observe that there has been a shift in the U.S. population due to the greater number of households with lower amounts of wealth. In a study they released earlier in 2023, “Why Do Late Boomers Have So Little Wealth and How Will Early Gen-Xers Fare?,” Chen, Munnell, and Quinby found that approximately 25% of the drop for late Boomers was attributable to a shift to households with lower average 401(k)/IRA balances, which in turn was due to an increasing percentage of households composed of minorities, as well as a drop in the number of households whose members are married and have college degrees.
A Note of Good News
The researchers attribute the state of things for late Boomers largely to the effect of the Great Recession on retirement earnings. And that, they suggest, at least is a hopeful sign for younger generations—since they will have longer to recover from those effects and amass greater savings.
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