Baby Boomer Retirement Income Expectations and Opportunities

A look at American retirement planning and lifetime income sources through the past, present and future.

Retirement Income Opportunities for Baby Boomers

s-c-s / iStock / Getty Images Plus

Retirement in the United States is a relatively recent invention. Over the course of a few generations, Americans have seen the enormous changes in how they achieve, enjoy, sustain and subsidize their lengthening golden years. Based on the recent findings in The State of America's Workforce study, we take a closer look at the past, present and future of retirement to consider how we got here and what options can afford us a lifetime of income. 

America's Retirement Timeline

While public pensions for municipal employees (i.e. firefighters and teachers) started in the mid-1800s, it wasn't until the early 20th century that American industries (i.e. railroads and banking) began promising support for employees after their work was done. At this time,  the average life span was 47. 1^Clark, Robert; Wilson, Jack "A History of Public Sector Pensions in the United States" 2003

When the federal government later created and passed the Social Security Act in 1935, setting the official retirement age at 65, the average life expectancy for American men was around 58. The post-WWII prosperity brought wealth and better medicine, along with improved longevity. Near the end of the baby boom in 1960, life expectancy in America reached 70. 2^Social Security Administration, "Social Security History: Life Expectancy for Social Security"

The following decade, a small shift in the tax code resulted in a big change in the retirement industry. The 401(k) was created to help supplement traditional retirement pensions through a tax-deferred allocation of salary. Soon, companies began replacing their pension plans with the defined contribution accounts. Today, pensions have all but disappeared from the private sector, and pre-retirees are looking to vary proportions of disparate traditional sources for lifetime income. Meanwhile, the average 65-year-old can expect to live another two decades. 2^Social Security Administration, "Social Security History: Life Expectancy for Social Security"

Baby Boomers' Expected Retirement Income Sources

The State of America's Workforce study of pre-retirees shows a generation of workers expecting to rely heavily on one of these traditional retirement vehicles, in spite of the myriad changes born out over the last century to this late-life stage. More than three-quarters of surveyed workers expect Social Security; almost two-thirds of workers will rely on 401(k) distributions; half will use personal savings; and about one-third will receive a pension. 3^Indexed Annuity Leadership Council. The State of America's Workforce: The Reality of Retirement Readiness. 2018.

The most alarming of those findings may be the heavy reliance on Social Security. According to the NHP Foundation, 62 percent of baby boomers think Social Security will provide more than half of their income during retirement. In reality, the benefits replace only around 40 percent of income. 4^The NHP Foundation. Boomers Unprepared for Looming Retirement Survey. 2018.

Looking at the long-term, reserves are projected to peak around 2020, and if no changes are made to the tax or benefit provision, it will be depleted around 2035. 5^Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. 2014. As one of the country's most prized programs, it will undoubtedly continue to be an important source of retirement income. But, these numbers do underscore the importance of thinking beyond the benefit as a sole or primary source.

What Boomers Are Doing to Prepare for Retirement

Not surprisingly, many are looking at working longer to help subsidize their golden years. The Workforce study found four in 10 baby boomers will likely work part time in retirement, either by choice or necessity. Another three in five are likely to work longer than they'd like to meet their personal retirement goal. On average, they expect to push back retirement by two years. 

Many have already taken measures to manage their financial futures. More than 40 percent of pre-retirement workers have already adjusted their lifestyle. Nearly 14 percent of pre-retirees are taking on multiple jobs to support their retirement saving goals. Close to 10 percent of workers have switched jobs for better retirement benefits. 

What Boomers Can Do to Prepare for Retirement Income Planning

This changing retirement model brings opportunity and more control of retirement income preparation. American workers can harness the shift by creating customized retirement plans that better align with individual needs and retirement goals. For those currently relying on Social Security and pensions to create a stream of retirement, other vehicles, like fixed index annuities, can offer the same benefit of certainty.

Looking beyond the traditional retirement income sources can help establish a little more long-term stability. A balanced and diversified approach can help position you for income growth and protection. Fixed index annuities can be a key component of a balanced financial plan, and uniquely designed to offer growth through a steady, guaranteed lifetime income stream, all while helping protecting the principle from uncertainty. 



Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC. 
The content is provided for informational purposes only and does not constitute advice. For specific details on how this may apply to your personal situation, contact your personal financial advisor or insurance agent for more details. American Equity contracts are only sold through independent agents. Please contact your state insurance department to see if there is an independent insurance agent in your area appointed to sell American Equity annuity contracts.
American Equity Investment Life Insurance Company® does not offer legal, investment, or tax advice. Please consult a qualified professional.