Citing a weakened link between work and wealth accumulation, the Center for Retirement Research at Boston College has found that late boomers—those born between 1955 and 1964—have 14.5% less in retirement assets than earlier retirees.
Whereas average retirement wealth for the mid boomer was $350,400, late boomers had just $299,700.
Gen X assets, however, are expected to rebound to earlier norms, according to a brief published by the center entitled, “What Happened to Late Boomers’ Retirement Wealth?”
The answer, according to the researchers: the Great Recession. Late boomers were in the wrong place at the wrong time, and never quite recovered.
“A decline in some wealth components had been expected as a result of the rise in Social Security’s Full Retirement Age and the shift from defined benefit to defined contribution plans,” wrote one of the brief’s co-authors, Anqi Chen, a senior research economist and assistant director of savings research. “But increasing 401(k)/IRA balances were predicted to offset the gap, since late boomers were the first generation where workers could have spent their whole career covered by a 401(k) plan.”
The Great Recession, however, threw a wrench in the employment plans of many late boomers, who were in their 40s—prime savings years—when the financial crisis hit.
Chen used data from the Health and Retirement Study, a National Institute on Aging-funded survey of Americans over 50 that looks at wealth and income from Social Security, defined benefit plans and defined contribution plans. Data from the Survey of Consumer Finances, which looks at work experience by generation and is published by the Federal Reserve, was also used to determine employment trends.
Looking at “war babies,” early boomers, mid boomers and late boomers, the expected pattern of wealth accumulation and income was that Social Security assets would remain fairly consistent, defined benefit plan assets would decrease and defined contribution plan assets would increase, the brief said.
That pattern held true for war babies, early boomers and mid boomers, but stopped with late boomers, when defined contribution wealth dropped sharply.
“Late boomers were not always behind in private retirement savings. In fact, until their mid-40s, late boomers held more 401(k)/IRA assets than earlier cohorts at the same age,” Chen wrote, adding at the timing of their mid-40s with the Great Recession meant their circumstances changed abruptly. “Growth ceased and average assets actually dropped. While their balances did start to grow again as they moved into their 50s, their holdings remained significantly below those of earlier cohorts.”
While Americans in all age groups lost jobs during the Great Recession, the employment rate among late boomers did not rebound as fully when the economy recovered, the research showed. Those who stayed unemployed were no longer able to contribute to their 401(k)s and quite likely may have had to withdraw what they had to support themselves.
Those who remained employed, however, also struggled.
“Even among working households, the Great Recession appears to have taken a greater toll on late boomers than on earlier cohorts,” the brief revealed. “Their average earnings flattened out and then declined continuously thereafter, leaving them in their 50s with earnings generally well below those of early and mid boomers.”
The decline should be limited to the late-boomer demographic, as employees who were Gen Xers and beyond during the Great Recession did rebound, the brief said.