Many baby boomers coping with post-pandemic financial uncertainties plan to remain in the workforce during their retirement years, says a recent survey by the Transamerica Center for Retirement Studies.
The 22nd Annual Transamerica Retirement Survey of Workers was developed with the help of the Harris Poll, which surveyed a nationally representative group of nearly 5,500 American workers — including 1,100 baby boomers, members of the generation born from 1946 to 1964 who are now ages 58 to 76.
The survey, which focuses on workers employed at for-profit companies, was conducted in late 2021 when, the Transamerica Center says, COVID-19 cases surged and many businesses delayed plans to bring workers back to offices.
We used the report’s data for the following look at the top financial priorities of baby boomers.
Contributing to an education fund
Baby boomer respondents who cited contributing to an education fund for my children, grandchildren or other as a financial priority: 7%
The average four-year public college in-state annual tuition is nearly $11,000, says the College Board; for a private school, it’s over $39,000.
As college costs climb, many grandparents step in to help, say personal finance experts including, for example, the Arkansas Federal Credit Union. Baby boomers, many of whom went to college, will gift trillions of dollars over the coming decades, it says.
Some boomers pay a student’s tuition directly to the college, assuring the money goes toward education and leaving up to $15,000 ($30,000 gifting jointly) in other tax-free giving available to the student under IRS rules, the credit union notes.
Others make contributions to 529 savings or prepaid tuition plans that grow tax-deferred. Withdrawals used for qualified student education expenses are tax-free at the federal level. The 529 plans are a great way to help, says Stacy Johnson, Money Talks News founder.
Boomers aren’t the only ones who say contributing to an education fund is important. It was cited as a priority by 13% of Generation Z survey respondents, 23% of millennials, and 16% of Generation Xers.
Paying off consumer debt other than credit cards, mortgages or student loans
Baby boomer respondents who cited paying off other consumer debt as a financial priority: 8%
Baby boomers are paying off all sorts of debt, and not just mortgages and credit cards. Other consumer debts may include auto loans, car title loans, personal loans, payday loans and retail installment loans for big-ticket items such as appliances, big-screen TVs, furniture or other goods.
The average personal loan balance for baby boomers increased 3.4% in 2021 to $20,370 as consumers emerged from the pandemic, credit reporting agency Experian says. At 9% annual interest rates, it would take 10 years of monthly payments of over $258 to pay off such loans, according to loan calculators.
Paying off other consumer debt is an even higher priority in other age groups, as it was cited by 10% of Generation Z survey respondents, 15% of millennials, and 13% of Gen Xers.
To see how to pay off $10,000 in debt without breaking a sweat, see our story here.
Supporting children
Baby boomer respondents who cited supporting children as a financial priority: 12%
About half of all parents with an adult child, including baby boomers, provide them with financial support, Savings.com found. They give an average of $1,000 a month for expenses like food, health insurance, rent, cellphones, tuition and even travel.
Supporting children was a priority cited in the Transamerica Center survey more often in younger age groups, including Generation Z, 18%, millennials, 42%; and Generation X, 30%. Also, 6% of baby boomer respondents also cited supporting their children’s children as a financial priority.
If you need tips on weaning your children financially with love and respect, check out “6 Ways to Help Adult Children Without Going Broke.”
Creating an inheritance or financial legacy
Baby boomer respondents who cited creating an inheritance or financial legacy as a financial priority: 14%
While baby boomers are expected to pass along $51 trillion to heirs and charities over the next 20 or so years, creating an inheritance or financial legacy was a priority for only 14% of boomers in the Transamerica Center survey.
While individual situations differ, of course, boomers are part of the wealthiest generation, holding more than $75 trillion in assets, according to the Federal Reserve. That compares with nearly $46 trillion for Generation X and nearly $14 trillion for millennials.
Still, nearly half of all baby boomers surveyed for the Transamerica Center fear they will outlive their wealth, as we reported in “The 2 Biggest Retirement Fears of Baby Boomers.”
Paying health care expenses
Baby boomer respondents who cited paying health care expenses as a financial priority: 17%
More than 3 out of 4 workers across all generations are saving to pay for health care expenses, pollsters report. However, it’s a lower priority for baby boomers than for members of other generations, with Generation Z at 22%, millennials, 28%; and Generation X, 21%.
Among baby boomers, 59% say they have money for health care expenses in savings, checking or brokerage accounts; 21%, a health savings account; 11%, a flexible spending account; and 3%, some other way. But 28% said they are not saving for health care expenses.
More than 2 in 5 baby boomers are 65 or older, according to 2020 Census Bureau estimates. That makes them eligible for Medicare, and all of them will be by 2030.
Just getting by
Baby boomer respondents who cited just getting by to cover basic living expenses as a financial priority: 17%
The share of surveyed baby boomers saying their financial priority is just getting was lower than other generations reported, including Generation Z, 35%, millennials, 30%; and Generation X, 26%.
In a 2021 Federal Reserve study about financial well-being, 88% of all retirees said were at least doing OK financially. The study indicated 27% percent of adults considered themselves retired although some still worked in some capacity. While 92% of retirees age 65 and up reported having Social Security income, 66% percent in that age group received income from a pension; 49% had interest, dividends, or rental income; and 25% had income from work.
Paying off mortgage
Baby boomer respondents who cited paying off a mortgage as a financial priority: 31%
Meeting your monthly mortgage payment while living on retirement income may rattle your nerves, especially when you see the stock market taking a roller coaster ride and the value of your IRA swinging. However, it was Generation X members who cited mortgage payoffs most often as a priority, at 35%.
Sometimes paying off the mortgage, getting out from under the monthly house payments and owning your home free and clear just feels good even if it’s not always the most efficient financially.
The average mortgage debt of baby boomers in 2021, the latest figures available, was $182,247, says Experian, the credit rating company.
Generally, if you’ve got the cash and you pay more in interest on your mortgage than you earn on the money you’d use to pay it off, then paying it off might be worth it.
But if your investments earn higher rates than you pay on your mortgage, or you have higher-interest debts you should pay off first, then keeping the mortgage may be your best bet. And don’t forget tax-deduction consequences if they apply to you.
Here are seven times you should not pay off a mortgage before retiring.
Paying off credit card debt
Baby boomer respondents who cited paying off credit card debt as a financial priority: 35%
Many workers of all ages took on more credit card debt while adjusting to the COVID-19 pandemic’s financial strains, the Transamerica study says.
Baby boomers have the second-highest average credit card debt of all the generations at $5,804, says a 2021 Experian study.
Paying only the minimum due monthly (estimated at $145 assuming an 18% interest rate), it would take 24 years to pay off that balance, according to a rate calculator. The interest alone could be more than an $8,000 bite out of retirement savings.
Tops in credit card debt is Generation X at $7,070, and paying it off is also a priority for 35% of Gen X survey respondents. Generation Z averages the lowest credit card debt, $2,282, with payoff a priority for only 33%, the lowest cited response rate; millennials average the second-lowest amount owed, $4,576, but make paying it off the highest generational priority, at 41%.
For the best way to kill off credit card debt, check this article.
Building emergency savings
Baby boomer respondents who cited building emergency savings as a financial priority: 35%
Workers’ emergency savings are low, the Transamerica Center says. People could have to dip into their retirement savings by taking loans or early withdrawals to cover financial setbacks such as unemployment, medical bills, home and car repairs, and other unexpected expenses.
While the median savings amount for all ages was $5,000, that appears to increase with age, with Generation Z workers the lowest with $2,000 and baby boomers with $15,000.
For nine tips on starting an emergency fund, check this article.
Saving for retirement
Baby boomer respondents who cited saving for retirement as a financial priority: 70%
Baby boomers have been susceptible to employment risks, volatility in the financial markets and increasing inflation, the Transamerica Center survey says.
Nearly half of baby boomers surveyed said they are or expect to work past age 70 or do not plan to retire at all. Only 2 in 10 said they were “very” confident they would fully retire with a comfortable lifestyle.
The median amount saved in household retirement accounts of surveyed baby boomers is $162,000, but that is tops of all the surveyed generations and almost double second-place Generation X’s $87,000.
Many baby boomers were mid-career when retirement savings plans like 401(k)s became available, so they haven’t had the same time horizon as younger generations to grow their investments, the Transamerica Center said.
“Baby boomers are extending their working lives, which can help bridge savings shortfalls,” says Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “However, it’s important for them to have backup plans because life’s unforeseen circumstances could derail their best intentions.”
To make your retirement dreams a reality, check out Money Talks News’ online course The Only Retirement Guide You’ll Ever Need.
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