- As the United States faces a full-blown retirement crisis, some baby boomers are entering their golden years with healthy savings.
- They benefit from now-rare pensions, rising property values and stock market gains.
- But low-income households face challenges with retirement savings and dwindling retirement plans.
If you’re looking for Michael, 75, try looking at the sky.
The retiree has a unique side hustle in retirement: he is a corporate jet pilot.
He takes on contract gigs because he loves it; it’s a common theme for Michael at this point in his life. He’s living the retirement dream, and splitting his time between Florida and Denver. According to documentation reviewed by Business Insider, his net worth, after a career in the navy and then geology, is just over $6 million.
“It’s totally comfortable. We have absolutely all the money we need to live our lives,” he said. And that nest egg has made a huge emotional difference: he has no financial stress.
It’s a similar story for Connie, a 79-year-old who said she didn’t really start planning for retirement until she was 30, newly divorced and working in state government from Oregon. After about 20 years in the public sector, she was able to retire with a nice pension — a type of advantage that is increasingly rare these days. Her Social Security checks also got a boost when her ex-spouse’s survivor benefits took effect. When she retires, she earns more than 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 a retirement crisis where more than half of Americans 65 and older live on just $30,000 a year and Social Security is set to run out in 2035 without legislative intervention. BI has their full names, but their last names are being withheld 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, based on lifelong savings and wise decisions, is possible – Michael and Connie are examples. But it’s also a reality that’s becoming increasingly rare, particularly 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 savings account. retirement.
In 2007, according to GAO Survey of Consumer Finances calculations, about 21 percent of low-income households had a retirement account balance. By 2019, this figure had fallen to 10%. Although 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 finds: “For all income groups except the highest, no detectable difference was found 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.
“Retirement could have gone the other way 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 got lucky with some investments and it just took off and grew,” Michael added.
The assets available to today’s retirees are also thriving; 401(k) investments have been boosted by the soaring stock market, meaning that people who are currently profiting from their retirement investments are on the winning end to S&P 500 historic highs.
“If we look at someone who had a 401(k) early enough, so from about 1982 to 2002, we had pretty high stock market returns,” David John, senior strategic policy adviser at AARP, told BI. He added, “They were able to build retirement savings at a time when there were both stock market returns and fairly low inflation.”
Connie chose a variable account to fund her retirement: her employer’s contributions were put into investments, rather than promising her a fixed return each year. Although her account lost money in some years due to market fluctuations, overall, her income still exceeded what she would have had with a fixed amount.
“There are a lot fewer boarding houses these days. It’s true,” Connie said.
And for the current group of retirees receiving these benefits, another factor could improve their bottom line: baby boomers are holding on to immensely valuable real estate. Thirty years ago, when today’s retirees began buying real estate, homes sold for an average of around $130,000. Today, they sell 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 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
Valérie, 46, is part of Generation X who is trying to follow in the footsteps of the successful baby boomers. Valérie, based in Seattle, has already retired. According to documentation seen by BI, she has more than a million in her 401(k), but that has been bitterly fought for. 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, she said. she declared, 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 ended up coming 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 is 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 that will provide us with opportunities for investment growth, savings and new products. There’s a huge amount of innovation happening,” John said. It may not be as easy as for someone “who started investing in the 1980s or 1990s and is now reaching the end of their career,” he added.
“But yes, in the future it is still possible.”
Is your retirement going well or are you worried about not being able to retire? Contact this journalist at jkaplan@businessinsider.com.