Amid a widespread retirement crisis in the United States, some baby boomers are entering their golden years with lots of savings.
They benefit from now rare pensions, increases in property values and stock market gains.
But low-income households face challenges related to retirement savings and dwindling pension plans.
If you’re looking for 75-year-old Michael, try looking skyward.
The retiree has a unique side job in retirement: he is a corporate airplane pilot.
He does contracts only because he loves it; This is a common theme for Michael at this point in his life. He is living the retirement dream and splits his time between Florida and Denver. According to documents reviewed by Business Insider, his net worth, after a career in the navy and then geology, is just over $6 million.
“It’s quite comfortable. We have absolutely all the money we need to live our lives,” he said. And this little nest egg has made a huge emotional difference: he no longer has financial stress.
It’s a similar story for Connie, a 79-year-old woman who said she didn’t really start planning for retirement until she was 30, newly divorced and working in Oregon state government. After about 20 years in the public sector, she was able to retire with a nice pension — an increasingly rare type of benefit these days. Her Social Security checks were also tightened when the survivor benefits When she retires, she earns more than she did with her previous salary.
“It gives me great peace of mind,” Connie said. It also fills her with a certain pride: her research and frugality have paid off.
“I’m definitely in that category of people who had a completely ordinary career and never made a lot of money, and yet now my retirement income is probably one and a half times what I never earned by working,” she said.
The three retirees Business Insider spoke to for this story are bright spots in the midst of a retirement crisis in which more than half of Americans 65 and older are struggling. living on only $30,000 a yearand social security funds should start to run out in 2035 without legislative intervention. All of their full names are known to BI, but their last names have not been released for privacy reasons.
Retirement savings methods have evolved, and some are now enjoying the golden age of retirement savings, when benefits were more generous and investments in real estate and stocks were booming. While it’s still possible to achieve it, a healthy retirement account has become rarer. And retirees who are living the dream are grateful for it.
“Being retired, not having financial stress and being able to help our kids and travel to see them and things like that, it’s just a fantastic place to be,” Michael said.
The confluence of factors that led to the liquidation of retirement accounts
A stable retirement, built on lifelong savings and smart decisions, is possible—Michael and Connie are examples. But it’s also a reality that’s becoming increasingly rare, especially for low-income Americans.
The Government Accountability Office found in a 2023 Report that low-income households ages 51 to 64 — those earning an average of $19,100 — are increasingly less likely to have anything in a retirement account.
In 2007, about 21 percent of low-income households had a retirement account, according to GAO Survey of Consumer Finances calculations. By 2019, this figure had fallen to 10%. While the losses were not as great for people in the middle income quintile, their retirement account balances declined slightly between 2007 and 2019. As the GAO notes: “For all but the highest income group, there was no detectable difference between median balances in 2019 and 2007.”
The decline of a particular account type could be the cause of this decline. In recent decades, the United States has moved away from pension plans, in which employers regularly pay compensation to former employees after they retire. Today, more and more American workers are using defined contribution plans, like 401(k), which rely on worker contributions to grow their funds.
The share of low-income households receiving a defined-benefit pension also halved between 2007 and 2019.
Michael acknowledges that some people have probably worked hard all their lives, but haven’t had better-paying jobs, meaning they’ve been able to save less money.
“Retirement could have gone differently for us. I could have made a few bad decisions and we could have lost a lot of money, and the scenario would have been different in terms of comfort,” he said.
“We were fortunate to have some investment and our business took off and grew,” Michael added.
The assets available to today’s retirees are also thriving; 401(k) investments have been buoyed by the stock market surge, meaning people currently enjoying their retirement investments are on the winning side of things. S&P 500 All-Time Highs.
“If you look at people who had a 401(k) plan early on, so from about 1982 to 2002, the stock market returns were pretty strong,” David John, AARP’s senior policy adviser, told BI. “These people were able to build retirement savings at a time when the stock market was profitable but inflation was pretty low,” he added.
Connie opted for a variable account to fund her pension: her employer contributions were allocated to investments, rather than promising a fixed return each year. Although her account lost money in some years due to the market, overall her income still exceeded what she would have had with a simply flat amount.
“There are a lot fewer pensions these days. That’s true,” Connie said.
And for the current group of retirees receiving these benefits, another thing could be improving their bottom lines: Baby boomers are clutching real estate of inestimable value. Thirty years ago, when today’s retirees may have started buying real estate, homes sold at a median price of approximately $130,000. Today, they are sold for almost $300,000 more.
Today’s retirees still receive full Social Security benefits, which is increasingly at risk for the next generation of workers who drop out. All this comes as retirement saving increasingly becomes an individual responsibility.
“Essentially, the people who need it the most are the ones who are least likely to have a retirement savings plan or a pension,” John said.
Some have still managed to achieve this stability, but it is rather an uphill battle
Valerie, 46, is part of Generation X who is trying to follow in the footsteps of successful baby boomers. Valerie, who lives in Seattle, is already retired. According to documents viewed by BI, she has more than $1 million in her 401(k), but it was hard-earned. Valerie, a former retail worker, tried to invest in real estate, but found herself on the other end of a tough market: Her properties were foreclosed during the mortgage crisis, says- her, and she “barely had $20 to survive.”
“I kept thinking about all these other ideas, like, ‘Well, how do I build wealth again? Do I give up? Is this the end of my life?’” she says. For Valerie, the answer eventually came down to her 401(k): She said she would borrow to reinvest in the market, then pay those loans back. Now that she has a secure retirement plan, she’s more willing to take risks to grow her wealth.
“When I was 18 or 19, I remember predicting that I would be where I am financially with my retirement account if I didn’t touch it and didn’t worry about it. And of course the math is right,” she said.
Valerie is an example of data that shows that it’s not all bad for future retirees, but rather that it may be an uphill battle.
“We have a rapidly evolving economy and there will be opportunities for investment growth, savings and new products. I mean, there’s an incredible amount of innovation happening there,” John said . It may not be as easy as for someone “who started investing, say, in the 1980s or 1990s and is now reaching the end of their career,” he said.
“But yes, in the future, it’s still possible. »
Are you looking forward to your retirement or are you worried that you might not be able to retire? Contact this journalist at jkaplan@businessinsider.com.
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