Baby Boomers Need to Know About This Nearly $1M Hole in Their Retirement

At this point, a good number of older Americans are probably making plans to retire in short order. But whether they can afford to is a different story.

A recent Northwestern Mutual report found that Americans on a whole think it will take $1.46 million to retire comfortably. But most older workers don’t have anywhere close to that level of savings.

Northwestern Mutual found that baby boomers, on average, had $120,300 saved. But the Federal Reserve has more comprehensive savings data. It found that as of 2022, the average retirement savings balance among boomers aged 65 to 74 was roughly $609,000.

But the Fed also found that the median savings amount for that same age group was only $200,000. This tells us that it’s a small percentage of wealthier savers who are bringing up the average.

So all told, it’s fair to say that the typical older American has roughly a $1 million savings gap. And if you’re in that boat, here are a couple of things you can do to overcome it.

Work longer to boost your nest egg

If you’re nearing retirement and aren’t confident in your level of savings, you may have to make some lifestyle adjustments. But another thing you could do is make adjustments to your retirement plans.

Instead of retiring now, stick with your job a few extra years to boost your nest egg. And even if you can only grow it modestly, you’ll be leaving your savings untapped a bit longer, allowing your existing investments to keep growing.

You should also know that if you’re between the ages of 60 and 63, starting this year, you’re allowed to make a super catch-up in your 401(k). Normally, workers 50 and older would get a $7,500 catch up, but that limit rises to $11,250 for people in that specific age range.

Delay Social Security a few extra years

If you’re staring at a savings shortfall, a good way to make up for it is to lock in a larger Social Security check each month. You’re eligible for your complete monthly benefit based on your earnings record at full retirement age (FRA), which is 67 for anyone born in 1960 or later. But for each year you delay Social Security past FRA, your benefit gets an 8% increase.

This means that at a minimum, you have the potential to grow your Social Security benefits by 24%. And that increase gets paid to you for the rest of your retirement.

It’s not too late to salvage your retirement

You may be worried about retirement if you don’t have many years left in the labor force. But don’t assume that your senior years are doomed just because your savings may not be exactly where you’d want them.

Not only can you work to boost your nest egg, but you can also make adjustments to your retirement plans to compensate for having less money. For example, you can downsize your living space, which could reduce your costs tremendously. You can also do a little bit of part-time work to supplement your senior income.

It’s also a good idea to talk to a financial advisor if you’re worried about not having enough money in retirement. An advisor can take a deep dive into your financial situation and make recommendations based on your needs. And they can also help you maximize your portfolio so you’re able to get as much income as possible out of it.

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