A lot of people from the baby boomer generation—those who were born between 1946 and 1964—are currently retiring. Although many have had rewarding professional lives and lived comfortably, some struggle with finances. It’s typical for members of this age group to lament over not setting aside enough money for their later life.
According to Pawonation.com's 2024 Survey on Financial Regrets , 37% of baby boomers (aged 60-78) express their top financial remorse as inadequate savings for retirement. Among those surveyed, this regret stood out as significantly more common than others.
Younger generations can benefit from studying both the financial missteps and triumphs of baby boomers, adopting positive practices while avoiding common pitfalls.
5 key financial insights from baby boomers
The top five valuable insights that younger folks can gain from baby boomers, along with ways to adopt these positive practices in their daily routines.
1. Start saving early
If baby boomers had the chance to redo one thing, many would choose differently. start saving for retirement earlier.
Setting aside money for retirement may not be at the forefront of your thoughts early in your career, but due to the power of compound interest, it’s beneficial to start early. power of compound interest Indeed, beginning early can be highly rewarding. Each penny you set aside now holds the possibility of increasing substantially as time goes on.
A simple compound interest calculator shows how minor yet persistent efforts build up significantly over time.
Suppose you begin saving at age 25. You initially contribute $1,000 and then add $100 each month for ten years. The account offers a 3% annual interest rate which compounds every month.
In just a decade, you could save up to $15,323! That’s pretty good considering a monthly contribution of $100. But picture this: extending your savings period to four decades. By the time you reach 65, you would accumulate $95,921—having invested merely $49,000 over those years.
Consider this scenario: Your buddy, Mark, begins saving 10 years later than you do. When he starts at age 35, he also invests an initial amount of $1,000 and then adds $100 each month. His investment grows with an annual interest rate of 3%, which compounds every month.
In 30 years, when he turns 65, he will only have $60,730 -- which is under two-thirds of your savings amount -- and his total contribution will be $37,000.
That's the impact of compounded earnings alongside steady savings.
2. Put your money into stocks, mutual funds, and exchange-traded funds (ETFs).
While saving money is great, investing your cash in assets such as stocks, mutual funds and ETFs is a proven method to accumulate wealth for your retirement years. According to a Gallup survey conducted in April 2023, approximately sixty-three percent of American adults aged 65 and over held equities via individual stocks, mutual funds, or retirement savings accounts.
Although minor ups and downs in stock prices happen frequently, these investments can yield significant gains over an extended period. S&P 500 , a closely followed benchmark, has traditionally provided an approximate yearly return of around 10 percent on average. Contrast this with even the best high-yield savings accounts , which generated a return of approximately 5 percent in November 2024.
Effective investment isn't just a single occurrence. Making consistent additions to your investments, referred to as dollar-cost averaging This strategy can help minimize market timing risk. By distributing your purchases gradually, you're less prone to buying when prices are high, which enables your assets to increase steadily over time.
Moreover, investment has become simpler and more accessible for younger generations compared to baby boomers. Below are some straightforward actions you can follow to begin expanding your investment portfolio.
- Begin with your employer’s retirement plan: If you have access to a 401(k) or a comparable retirement plan, retirement plan At work, investing can be as simple as completing a few documents, selecting your investment options, and setting up automatic contributions. Try to contribute enough to maximize the match. employer match If your company provides one—it basically amounts to free cash.
- Open an IRA: If your employer doesn't provide a 401(k), you can set up an IRA individually with a financial institution. online brokerage company Similar to Fidelity or Charles Schwab. These accounts do not impose yearly charges and provide excellent tax advantages, much like a 401(k).
- Begin with ETFs and index funds: These investments provide you with ownership in a varied selection of stocks and/or bonds, potentially minimizing risk and offering consistent growth over the long term.
In what ways can a consultant be of assistance?
Looking for professional advice on retirement planning or investment management? Pawonation.com’s AdvisorMatch I can link you with a Certified Financial Planner™ who will assist you in reaching your monetary objectives.
3. Spend according to what you earn
The boomers came of age during an era of economic prosperity, and many experienced substantial incomes and job security—but excessive spending can eventually catch up with anybody. It’s simple to get into trouble this way. let lifestyle creep set in , where each raise goes to nicer cars, bigger houses and fancier vacations instead of your bank account.
Understanding how to live beneath your financial capacity today can assist you in accumulating greater savings for the future. The initial step involves gaining control over where your funds are being directed.
To efficiently handle your money matters, think about the 50/30/20 rule This method recommends distributing 50 percent of your post-tax earnings toward necessities, 30 percent towards desires, and 20 percent towards saving money or paying off debts. Budgeting apps Can assist you in monitoring your expenses, pinpoint sections where you can reduce costs, and maintain focus on achieving your monetary objectives.
Below are additional suggestions to assist you in living within your budget.
- Designate specific days or weekends for not spending money: Pick one day a week or one weekend a month to avoid spending any money beyond absolute essentials. This small change can keep you on track and make spending feel more intentional.
- Cancel unused subscriptions: Do a monthly audit of your subscriptions — streaming services, news apps, old gym memberships, etc. Canceling even a couple can add up to noticeable monthly savings.
- Eat at home: Eating at restaurants and getting takeaway can become quite expensive quickly. Previous generations managed to save significant amounts by preparing meals at home, and you can too. Establish a weekly meal planning routine to resist the urge to dine out, and use your day off to prepare ingredients ahead of time for simpler cooking during the weekdays.
- Utilize cash for expenses outside your budget. When it comes to "fun" expenditures, try opting for cash rather than swiping your card. This way, you have a fixed monthly allowance, plus parting with actual bills might make you more cautious about what you buy.
4. Pay off debt
Since the 1990s, older Americans have increasingly carried debt, according to 2023 research from the Center for Retirement Research at Boston College. While mortgage debt accounts for a large portion of this increase, other forms of non-secured debt — such as student loans , medical debt and credit cards — have also risen among older adults. This trend is especially concerning for financially vulnerable households.
And when it comes to financial regrets, 13 percent of baby boomers say they regret taking on too much credit card debt, according to Pawonation.com’s Financial Regrets survey . Credit card debt was the second most commonly cited regret by boomers behind not saving earlier for retirement.
Eliminating high-interest debt before retirement can put more wiggle room in your budget, especially when you’re on a fixed income. Here are some things you can do to pay off credit card debt.
- Utilize either the debt snowball technique or the debt avalanche approach: The snowball approach begins by settling smaller debt amounts initially, whereas the avalanche technique focuses on eliminating high-interest obligations first. Choose between them based on your preference. debt payoff strategy That approach helps you gain traction and reduces the interest cost.
- Round-up payments: Rather than just making the minimum payment on your credit cards, increase your payments by rounding them up; say you change an $80 payment to $100. Adding even this modest extra sum monthly can significantly impact your balance over the long run.
- Make biweekly payments: Rather than having a single monthly payment, go for half-payments made bi-weekly . This will result in one extra full payment each year, reducing your balance faster and saving on interest.
- Work with a nonprofit credit counseling agency: If you feel overwhelmed, a credit counselor Can assist you in crafting a strategy, combining debts, and possibly securing reduced interest rates from your lenders. Seek out a non-profit organization for reliable, affordable assistance.
5. Prioritize your well-being — it comes with a high cost.
Many baby boomers have been significantly impacted by health care expenses, particularly as they've advanced in age. Often, they discovered (too late in some cases) that neglecting regular medical check-ups, foregoing insurance coverage, and failing to plan for extended care can result in substantial financial errors. According to Fidelity, a 65-year-old who retires next year might expect to incur approximately $165,000 in healthcare costs on average. medical expenses during retirement .
While Medicare , the federal health insurance program for people 65 and older, covers many of your health care costs in retirement, it doesn’t cover everything. It isn’t free either. So planning ahead for medical expenses now can protect your nest egg down the road.
Here are a few things you can do to prepare for medical costs in retirement.
- Contribute to an HSA: If you have a high-deductible health plan, consider contributing extra money to your health savings account (HSA). Contributions are tax-deductible, and they grow tax-free, giving you a leg up on future health costs. Plus you can withdraw money tax-free for any reason after age 65 — right when you’re likely to need that money most.
- Invest in your HSA: Once you’ve built up a few thousand dollars for immediate health needs, consider allocating some of your HSA money — Some HSAs provide investment choices like ETFs and mutual funds.
- Consider exploring long-term care insurance options: Long-term care insurance It can assist with covering the significant expenses associated with assisted living and nursing home care. The premiums are typically more affordable when purchased during one’s 40s, making it wise to think about this option sooner rather than later.
- Stay current with preventative maintenance: Keeping up with good bodily fitness today can reduce your chances of developing chronic illnesses further down the road. Routine medical appointments, consistent physical activity, and eating well-rounded meals are smart investments for reducing future healthcare expenses.
Bottom line
Baby boomers’ biggest financial regrets offer valuable lessons for younger generations. By saving early, investing wisely and living within your means, you can build a strong financial foundation and enjoy a fulfilling retirement.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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