This article takes a look at the 12 brilliant money moves baby boomers are making in retirement. If you wish to skip our detailed analysis of Baby Boomers' wealth and retirement, you may go to the 5 Brilliant Money Moves Baby Boomers Are Making in Retirement.
On Baby Boomers' Wealth and Retirement
Baby Boomers are the wealthiest generation on this planet, period. According to Fortune, their net worth falls between $970,000 to $1.2 million. As of 2022, this generation held a total of $78.1 trillion in assets, constituting a significant 50% share of all assets in the United States. The substantial wealth amassed by this generational cohort is poised for a significant transfer in the coming years. Reportedly, an estimated $53 trillion of wealth will be transferred from baby boomers, representing 63% of the total generational wealth transition.
As the transfer of wealth awaits, this generational cohort is embracing and making the most of their golden years. Back in May 2023, internal data from the Bank of America Corporation (NYSE:BAC) showed a widening gap in the spending habits of working-age adults and retirees. The data showed that baby boomers have been outspending the younger generations, with a notable focus on expenditures like hotels and travel.
“Some of these rebounds in travel or broader leisure services may be a kind of unwinding — they’re splurging or making good on something they couldn’t do during the pandemic.”
- David Tinsley, senior economist at the Bank of America Corporation (NYSE:BAC) Institute.
Besides making up for lost time in the pandemic, seniors have also been making the most of their COLA, the highest they’ve received since 1981. Fortune notes that many of the seniors today are currently enjoying financial prosperity, with high interest rates contributing to the growth of their accounts. Consequently, now is the right time to go all-in on old-people stocks.
“Millennials are really feeling the impact of the hiking cycle. Boomers, not so much.”
- BofA quantitative strategist Ohsung Kwon.
The Bank of America Corporation (NYSE:BAC) notes that stocks like American Express Company (NYSE:AXP), Toll Brothers, Inc. (NYSE:TOL), Welltower Inc. (NYSE:WELL), and Service Corporation International (NYSE:SCI) are going to be hot as Boomers continue to spend on healthcare, entertainment, and home improvement. This generation accounts for 33% of total card billings at American Express Company (NYSE:AXP), which is why their stock can be a good opportunity to seize. American Express Company (NYSE:AXP) is also known to specialize in entertainment and travel, the two important spending categories for seniors.
Moreover, Toll Brothers, Inc. (NYSE:TOL) is a building company that specializes in luxury homes, another boomer stock to buy amidst thriving seniors. Baby Boomers often help their children in getting their first homes and also dominate the housing market, which is why Toll Brothers, Inc. (NYSE:TOL) are also a good buy.
According to Scott Barlow, a market strategist at Globe and Mail, demographic trends like these move slowly so there's no need for investors to rush. If stocks do begin to pick up pace, or market volatility renders them at steep discounts, they can consider it as a good chance to add it to their portfolio.
Meanwhile, the Transamerica Center for Retirement Studies notes that the median retirement savings for Baby Boomers is $202,000. Based on this figure, the average retirement income for them is $8,000 annually. These figures imply that even though baby boomers have the most wealth amassed, there are yet many others who don't have ample money saved and need to figure out some wise moves to help supplement their retirement income.
All in all, Baby Boomers are making some brilliant money moves in retirement which is augmenting their game. Let’s check out these moves.
An elderly couple consulting with a financial advisor on their retirement investments.
To compile the list of 12 brilliant money moves baby boomers are making in retirement, we have used forums such as Reddit and Quora to analyze what this generation is doing to make more money or save it during their retirement years. A consensus approach was used to rank the moves suggested, with 1 point awarded to a place each time it was recommended by a Boomer.
Scores were summed up and places were ranked in an ascending order from the lowest to the highest scores.
Here are 12 Brilliant Money Moves Baby Boomers Are Making in Retirement:
12. Delaying Social Security
Insider Monkey Score: 10
This one’s a no-brainer. Delaying social security until the full retirement age allows retirees to claim full benefits. According to the Social Security Administration, Social Security retirement benefits are increased by a certain percentage for each month an individual delays starting their benefits beyond full retirement age. This benefit increase stops once they reach the age of 70. Individuals who decide to claim their benefits early, such as at the age of 62, can only claim 70% of their scheduled benefits. Those who decide to wait until 67 receive the official amount they are entitled to, and those who wait until 70 get 124% of the primary insurance amount.
“…People are living longer today, and for couples, the high-earner's benefit lasts for the lifetime of two individuals. The odds of benefiting from the insurance value of delaying Social Security are much greater than 50% for reasonably healthy individuals.”
-Wade Pfau, a respected retirement researcher and the author of The Retirement Planning Guidebook.
11. Senior Discounts
Insider Monkey Score: 12
Asking for a senior discount can help individuals save hundreds of dollars. Many companies offer senior discounts for people aged 55 or older. Kohl's offers an elder discount every Wednesday where they can avail 15% off on in-store purchases. For clothing and home décor, seniors aged 55 and over can get a 10% discount every Tuesday at Ross.
Other companies offering senior discounts include restaurants such as Denny's and IHOP, grocery stores such as Kroger, and hotels such as Marriott and Hilton, to name a few. It’s always best to check the official pages or directly contact companies to ask whether they are offering a senior discount or not.
10. Executing Roth Conversions
Insider Monkey Score: 13
One brilliant money move baby boomers are making in retirement is executing Roth conversions. Roth conversions are a tax-planning technique that allows seniors to have greater control over their taxable income. A Roth IRA is funded with after-tax dollars, such that withdrawals become tax-free. The annual limit of contributions to Roth IRAs is $6,500 for 2023. According to The Charles Schwab Corporation (NYSE:SCHW), there are four cases in which it makes sense to convert to a Roth account.
First, if an individual believes their tax bracket is going to be higher in retirement. In this case, paying taxes at the current rate would make more sense than later. Second, if a senior wants to maximize their estate for their heirs and don't need to use the IRA funds during their lifetime. Third, most of their assets are in tax-deferred accounts. Converting to a Roth will allow them to better manage their tax brackets. Lastly, they have low-income and irregular income streams.
9. Financial Advisor Consultation
Insider Monkey Score: 15
According to a study by Northwestern Mutual's 2022 Planning and Progress, only 35% of Americans seek help from a financial advisor. However, the study also found that 62% of them believe they need financial improvement, and more people are now realizing the value of financial help.
"Despite the fact that too many Americans are still not getting financial help, we saw a spike last year in the number of people seeking professional advice and those numbers have held stable in 2022 rather than sliding back to pre-pandemic levels."
- Tim Gerend, executive vice president and chief distribution officer at Northwestern Mutual
With the help of a financial advisor, seniors can maximize their tax efficiency, make better asset allocation, optimize social security, handle withdrawals, and even help with portfolio re-balancing.
8. Tapping on HSA Accounts
Insider Monkey Score: 16
More and more individuals are struggling to pay healthcare expenses in the USA. According to a Gallup poll, 38% of Americans stated that they or a family member delayed treatment because of financial reasons. However, one brilliant money move baby boomers have made over the years is creating tax-advantaged healthcare accounts with their employers.
Flexible Savings Accounts (FSAs) and Health Savings Accounts (HSAs) are being used by Boomers to pay medical expenses and even Medicare premiums. These accounts help protect retirement savings by allowing individuals to pay for healthcare instead of withdrawing from retirement accounts. In particular, an HSA account can be used to withdraw funds for any reason after the age of 65, and that too, without any penalty.
7. Real Estate Investments
Insider Monkey Score: 19
Baby Boomers aren’t just crazy wealthy, but are also the largest generation of home buyers today. According to the National Association of Realtors (NAR), this demographic makes up 39% of all home buyers, the most of any generation. Investments in real estate allow baby boomers to have an additional source of income in retirement. Rental properties, in particular, offer several tax benefits for seniors such as property taxes, mortgage interest, and even depreciation.
Another recent report by NAR states that older buyers today are in a better position to buy homes in the current market. Spectators are signaling toward an easing housing market, something baby boomers can capitalize on. Buying real estate now will allow them to build more wealth the next time prices rise. Of the $82 trillion nest egg that boomers have built over the years, nearly one-fourth has been built this way.
6. Working Part-Time
Insider Monkey Score: 21
Working part-time is another wise money move that baby boomers are making in retirement. Owing to increased longevity spans and high costs of living, T. Rowe Price asserts that 20% of retirees are continuing to work part-time. 7% are also searching for jobs, either for money or other reasons. However, there is still a surplus of 1.98 million retirees, a potential problem for the economy.
Provided that those who can return to work or work part-time do so, seniors will not only be able to help themselves but also the economy.
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Disclosure: none. 12 Brilliant Money Moves Baby Boomers Are Making in Retirement is originally published on Insider Monkey.