Even With Social Security, Baby Boomers Are Financially Struggling. Here's The Evidence

While many might assume baby boomers are handling retirement comfortably, due in large part to Social Security, their financial futures are less clear than you might expect. Inflation, housing prices, and even skyrocketing insurance are all causing the average American to financially struggle, but the situation can be even worse for retirees with fixed incomes. While cost-of-living-adjustments (also known as COLA) can help to offset certain inflationary expenses for Social Security beneficiaries, many retirees still don't have the kind of flexibility in their monthly budget to compensate for the rapid price increases that the United States has experienced post-pandemic.

According to the Bureau of Labor Statistics' latest Consumer Expenditure Survey, the average household's monthly expenses are $6,081 (which was an almost 9.5% increase over 2022 monthly expenditures). However, looking specifically at those over 65 years old, their monthly expenditures averaged about $4,818 per month in 2022. The U.S. Census Bureau reports the median retirement income for U.S. adults aged 65 and older was $50,290, meaning many retirees are living with a median monthly income of roughly $4,191.

This means that, while the incomes of retirees might allow them to just cover their expenses, it doesn't leave them with much extra in case of emergencies or any additional increases in prices. This is especially troubling when you consider that retirees in the country are also spending a higher proportion of their income ($7,505 annually) on health care than the average person.

2024 is part of Peak 65, or the silver tsunami, when record-breaking amounts of Americans are due to hit retirement age. In fact, 11,000 people are expected to turn 65 every single day in 2024, with 4.1 million people turning 65 every year through 2027. This isn't only the largest surge in history, but it also presents new challenges for existing retirement structures (as well as an added strain on Social Security programs). Many U.S. retirees, or those approaching retirement might be asking themselves myriad questions surrounding their retirement plans.

As Elizabeth O'Brien, senior personal finance reporter for Barron's, told CBS News, "You've got to think about what you're gonna do with your 401(k). If you're still working and you're retiring, are you gonna roll that over into an individual retirement account? Are you gonna leave that where it is with your company?"

With more and more retirees concerned that they'll run out of money during retirement, financial planning can be the key to ensuring a comfortable financial future. However, the increase in cost of living has made it not only harder for those trying to save for retirement, but also more difficult for those who have already retired and trying to live within their budget. It's also worth mentioning that while older baby boomers might not experience the loss of Social Security benefits in their lifetime, the potential for a retirement cliff is a significant concern for younger boomers as well as younger generations (especially as Generation X begins to prepare for their retirement).

Nationwide Retirement Institute's 2024 Social Security survey found that 72% of respondents over the age of 50 worried about the exhaustion of Social Security funding in their lifetime. It's easy to understand this concern since the current possibility of these funds running out is high. Currently, the Social Security Board of Trustees estimates that Social Security's fund reserves will run out in 2035. This could lead to widespread benefit cuts that would financially hurt millions of older Americans.

According to the Social Security Administration, as of June 2024, approximately nine out of every 10 people aged 65 years and older received Social Security benefits, with these benefits making up roughly 30% of their income. However, for some, these benefits are their primary source of income. In fact, program benefits make up 90% (or more) of the total income for 12% of men and 15% of women aged 65 and older.

There are myriad ways to help correct the projected funding shortfall for Social Security, but the current political climate has made passing potential solutions almost impossible. With very disparate views of how to tackle the problem, Republicans and Democrats in Congress have been unable to come to any kind of consensus. It's worth noting that the outcome of this November's presidential election could have a significant impact on Social Security's future. While Democrats have largely committed to avoiding benefits cuts and extended retirement ages, Republicans have suggested pushing the full retirement age to 69 and even cutting disability benefits.