Every day in the United States, 10,000 people turn age 65, according to the U.S. Department of Health and Human Services. Next year, during “Peak 65” that number will jump to 12,000 per day and there will be more 65-year-olds in the country than at any other time in history. And by 2030, 20% of our population will be 65 or older. That means retirement is on the minds of many, even those older baby boomers who’ve already left the workforce.
For decades those workers built their retirement security on three pillars: employer pensions, personal savings, and Social Security. But the landscape has dramatically and fundamentally changed since then, and those days are long gone. When large numbers of boomers hit the labor market in 1980, 84% of private sector employees surveyed by the U.S. Bureau of Labor Statistics said they were covered by private retirement pension plans. Today, only 15% of private sector workers say they have access to similar defined benefit retirement plans.
Since most of us can’t rely on pensions, and Social Security was only meant to replace about 40% of income in retirement, it’s important to have as diverse a portfolio as possible to be prepared for a future where we are living longer. However, the Center for Retirement Research at Boston College found that as many as 50% of households are “at risk” of not being able to maintain their lifestyle in retirement.
Whether you’re in the Peak 65 group or quite a bit younger, it’s never too early to start building or too late to start adding to your nest egg. And don’t beat yourself up, Benefits Pro reports that 58 million Americans (a third of the working-age population) have no retirement savings at all.
What matters is that you start as soon as possible. And it’s OK to take baby steps.
To have a truly diverse portfolio, you need products from each of the four asset classes listed below. (You don’t have to start with all four — just get started with the option that’s least intimidating):
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Cash and cash equivalents: These are low-risk, highly liquid assets like certificates of deposit (CDs), money market accounts, or short-term treasury bills. This is an easy place to start because CDs can be purchased in a matter of minutes on a mundane bank visit.
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Equities (stocks): These offer growth potential but are subject to higher volatility.
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Fixed-income (bonds): These provide more stability and income, but generally have lower growth potential.
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Real assets (real estate, commodities): These can act as hedges against inflation.
Some analysts are forecasting that real estate assets may have a major impact on 2024 going into 2025. AARP estimates that 51% of people over 50 own 70% of the homes in this country. That could lead to a “silver tsunami” when baby boomers start downsizing, flooding the market with more than 30 million housing units and potentially bringing housing prices down. With Redfin reporting that baby boomers are sitting on $18 trillion in home equity, homeowners with little retirement savings might consider downsizing and using at least a portion of their profit from the sale for retirement planning.