Baby boomers average $162,000 in retirement savings. Here are 3 ways they can maximize their Social Security benefits and increase their retirement income

Baby boomers are leaving the workforce en masse and are retiring. In the third quarter of 2020, approximately 28.6 million baby boomers (born between 1946 and 1964) reported being out of work due to retirement.

For many in this generation, they have already started tapping into their retirement savings, while others have a few more working years to grow their nest egg.

How Much Have Baby Boomers Saved for Retirement?

A recent report from the TransAmerica Center for Retirement Studies found that members of this generation have an average of $162,000 in all of their retirement savings accounts. That’s compared to $33,000 for Gen Zers, $87,000 for Gen Xers, and $50,000 for millennials. The estimated average savings among all employees is $67,000.

Baby boomers also, on average, started retirement savings later than any other generation. The median age of boomers at the start of their retirement savings journey was 35 years. This is partly due to the shift away from traditional retirement plans and the emergence of 401(k) plans in the middle of many boomers’ professional careers.

Challenges boomers face when saving for retirement

Baby boomer savers have had to navigate a changing economic landscape that has made it more difficult to grow their retirement savings.

“Obstacles baby boomers have faced in saving for retirement include extremely low interest rates on fixed income investments, the dotcom crash, the real estate/financial crisis, the pandemic and more recently 40 years of high inflation,” says David Rosenstrock, director at Wharton Wealth Planning. “Additionally, rising health care costs, increasing life expectancy, caring for aging parents, the potential for reduced Social Security benefits (in the future), and automation of the workforce are all barriers to saving.”

Increased life expectancy

An increase in their life expectancy has made it more difficult for boomers to determine how much to save. When the first boomers were born, the average life expectancy was about 63 years. Today, boomers can expect to live into their 80s.

“How long you live and how much you have to spend on out-of-pocket healthcare costs and long-term care are important factors in figuring out how much you need. Healthcare costs are one of the most serious risks to retirement security, so it’s important to understand how to plan for these large costs and how to navigate the system,” says Rosenstrock.

Uncertainty around social benefits

In November 2022, the average monthly benefit for retired employees was just over $1,600, but that benefit could be reduced in the coming years. As of 2034, retirees will only receive 77% of their full benefits without additional funding for the Social Security program, according to the 2022 Social Security Trustees’ Report. Almost half of the baby boomers surveyed (46%) are more likely than younger generations to fear a reduction or abolition of social security in the future.

The Great Recession and the COVID-19 Pandemic

Many savers have had to deal with the financial fallout from both the 2007 recession and the early aftermath of the COVID-19 pandemic, but for boomers already in their retirement years or nearing retirement, the impact could be more severe. Many savers put into their pension savings to keep their heads above water. During the third quarter, the average 401(k) balance at Fidelity fell an average of 23% from a year ago, according to recent research from Fidelity Investments, which handles approximately 35 million retirement accounts. IRA balances fell nearly 25% year over year, and 403(b) accounts — retirement plans typically used by nonprofits — fell 21%.

3 ways baby boomers can increase their retirement savings

It’s not too late for Boomers looking to boost their retirement savings. However, it’s important to be strategic about the money moves you make so close to your golden years.

  1. Take advantage of catch-up contributions. For savers who are over age 50, the IRS allows them to make additional contributions to their retirement savings accounts. For 2023, the contribution limit is $6,500 (plus the additional catch-up contribution of $1,000). If you haven’t saved as much as you need to retire comfortably, these extra contributions can help you save as much tax benefit as possible in your final years of work.

  2. Delay taking social security. It may be tempting to tap into your Social Security benefits once you reach age 62, but it’s more beneficial to wait if you can. “The earliest age you can apply for Social Security is 62, but if you file before full retirement age (as defined by the IRS), you will face reduced benefits of about 75% of the amount you get.” eligible for,” says Rosenstrock. “Full retirement age depends on your year of birth. You can also defer your application until after full retirement age. For every year that you defer your benefit, until you turn 70, your benefit will grow by 8%, so that you will receive a maximum of approximately 132% of your regular benefit.”

  3. Consider continuing to work after retirement age. If the sound of leaving the workforce altogether doesn’t appeal to you, consider continuing to work in some capacity even after you reach retirement age. “Working past the traditional retirement age, either part-time or full-time, is a great way to stretch and supplement retirement income,” says Rosenstrock. “Retirement delays can have a significant impact on retirement finances by giving your existing retirement savings more time to grow and shortening the period of retirement you have to pay for.”

The takeaway meals

Many boomers are already living off their retirement savings, but it’s not too late to boost your savings and give yourself more financial cushion that will sustain you for the rest of your year. By making the most of your tax-advantaged savings accounts, managing your Social Security benefits wisely, and looking for ways to increase your income, you can ensure you have what you need to retire comfortably.

This story was originally on Fortune.com

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