The country is on the verge of reaching "peak 65" as a large number of younger baby boomers hit the age of 65 this year, marking the start of the largest wave of retirements in U.S. history. However, a new analysis reveals that most of these Americans are not financially ready to retire, putting many at risk of living in poverty.
The retirement of the youngest baby boomers, those born between 1959 and 1965, is expected to have significant impacts on the U.S. economy, with some negative consequences, according to a study conducted by the ALI Retirement Income Institute, a non-profit organization dedicated to retirement education.
This latest research highlights the disparities in income and wealth that have affected a generation that, overall, is considered the wealthiest in the nation. While White individuals, men, and those with college degrees are more likely to be financially prepared for retirement, many people of color, women, and individuals with only a high school education are falling behind, as per the study's findings.
"America has never seen so many people reaching retirement age over a short period, and well over half of them will find it challenging to meet their needs through their retirements, let alone maintain their current standard of living," said Robert J. Shapiro, a co-author of the study and the chairman of economic consulting firm Sonecon, in a statement.
The findings echo other research that has found more than 1 in 4 older workers are nearing retirement without a penny in savings. While many younger people have yet to start putting money for their later years, it's more concerning for younger boomers approaching retirement age given they have only a few years left to sock money away.
About 53% of "peak boomers," or the tail end of the generation who will turn 65 between 2024 and 2030, have less than $250,000 in assets, the new study found. But huge disparities exist between within the group, the study found, based on its analysis of data from the Federal Reserve and the University of Michigan Health and Retirement Study.
For instance, peak boomer men have a median retirement balance of $268,745, while women of the same age have savings of only $185,086. Peak boomers with only a high school degree have saved a median of $75,300 for retirement, compared with $591,158 for college graduates.
Social Security and Retirement Concerns
Current projections indicate that Social Security is meant to replace only 40% of a person's working income. However, the average annual benefit stands at approximately $23,000, falling short of providing a comfortable retirement for many individuals. If the Social Security system is not strengthened before its trust funds run out in 2033, there is a possibility of facing across-the-board benefit cuts.
