Austin Williams: 4 Reasons Boomers Are Retiring Broke -- and How Millennials Can Avoid These Mistakes
It may sound crazy, but it's true: Baby boomers are retiring broke. Despite this generation holding wealth equal to $85 trillion (according to the Washington Post), Pew Research reported that, as of 2022, the top 10% of boomers own a whopping 71% of that wealth.
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YouTuber Austin Williams recently covered this topic in his video titled, “Why Boomers Are Retiring Broke," sharing four reasons he thinks it’s the case. For millennials looking to learn from older generations, Williams' insights can help them avoid the same mistakes.
1. Their Assets Aren’t Creating Income
While reliable income streams are a necessity for any retiree, many don’t have enough to create financial stability. That intensifies the challenge of inadequate savings.
“The median boomer has a net worth of $387,000," said Williams. "And that number isn’t liquid money sitting in a vault, but it’s spread out between their homes, retirement accounts and other small assets."
Millennials can avoid this by creating multiple streams of income. Contributing to your 401(k) and investing in an online brokerage account and annuities can provide income in retirement. Starting now gives your investments time to grow and be there for you in retirement.
2. Too Much of Their Wealth Is Tied to Their Homes
According to Redfin, boomers hold roughly $13 trillion in real estate. In his video, Williams noted that the majority of boomers — almost 80% — are homeowners, which pushes up their net worth.
“The problem with home wealth is that it isn’t liquid. You can’t withdraw a percentage of your home to use it to fund retirement,” said Williams. Homeownership also comes with added costs, including upkeep and property taxes.
Owning a home can be a good thing; there's no denying that. But millennials can avoid their wealth being tied up in their homes by addressing necessary fixes sooner and downgrading when it makes sense, with an eye to keeping costs in check. Moving to a tax-friendly state when nearing retirement, not to mention building wealth outside of homeownership, will also help.
3. Their Retirement Savings Are Insufficient
For many boomers, retirement planning changed for them mid-career. Pensions were a reality for years, then the ground shifted, moving more responsibility to Americans via 401(k) plans. Boomers who avoided active participation in 401(k) lost out.
“The median boomer has a retirement account balance of $100,000 to $200,000,” said Williams.
That balance really isn't a lot, especially for boomers who plan to live for several decades on that money. Williams said, “That amount is only bringing in an income of $300 to $700 a month under the 4% rule," which isn't realistic for most retirees to live on.
Contributing as much as possible to your retirement accounts is key for millennials who don’t want to retire broke. If funds are tight and you work for a company that will match your 401(k) contributions, commit to saving enough to receive the full company match, as that’s free money. When you receive a raise, increase your contribution by 1%.
4. They Have Limited Assets Beyond 401(k) Plans
Many boomers have little beyond their homes and 401(k) plans. Williams pointed out that most have minimal savings that don’t help much.
“The reality is, although the typical boomer has a net worth of over $300,000, most of that wealth isn’t that usable in their day-to-day retirement,” said Williams.
Diversifying assets is important for retirement planning. Millennials can begin by growing assets outside 401(k) plans. Amassing savings, starting a business, contributing to an IRA and HSA and more are all useful ways to build assets you can rely on in retirement.
Retiring broke isn’t something most Americans want to do. Starting now and diversifying assets are strategic ways for many millennials to avoid the predicament.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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