Since Baby Boomers are between the ages of 59 and 77, many are retired already. However, some of the youngest Boomers may still be in the workforce and preparing for their later years.

No matter which category they fall into, the reality is that this generation faces two big disadvantages when it comes to retirement readiness. If they can’t overcome them, it could have dire consequences for their financial security after they’ve left work for good.

Key Points from 24/7 Wall St.:

• Baby Boomers faced a mid-career change to 401(k) accounts.
• Many Boomers got a late start investing for retirement.
• Boomers can overcome these challenges by saving more, working longer, or living on a tighter budget.

Here’s what those challenges are, along with some tips Boomers can try out to try to make sure they’re on track to enjoy their golden years instead of struggling.

1. A mid-career shift to a 401(k) left many unprepared

For Baby Boomers, the timing of the transition to 401(k) accounts is one of the single biggest challenges.

While the Revenue Act of 1978 created new tax breaks for employees who chose to receive part of their paychecks as deferred compensation, 401(k)s didn’t really begin to catch on until 1981 when the IRS made clear that employers could divert part of an employee’s payments into a 401(k) plan.

Before that time, the majority of employers who offered retirement benefits provided a defined benefit pension plan, which is very different. Defined benefit plans guaranteed workers a pension — typically for life — with the amount they were eligible for based on years of service. It wasn’t the job of individual workers to decide how much to invest, or to pick what investment to buy.

Soon, though, defined benefit plans began to virtually disappear in the private sector as 401(k)s gained popularity. Unfortunately, since many Boomers didn’t grow up with the 401(k) as the primary mode of saving for retirement, they weren’t in the habit, they didn’t diligently invest throughout their careers, and they didn’t know how to effectively manage these accounts.

The result: the median 401(k) balance for those 70 and over is just $104,072 while those in their 60s have a median balance of $206,719 and those in their 50s have a median balance of $258,909, according to Empower.

2. Baby boomers got a late start

Boomers also face another big retirement disadvantage. The median age when they started saving was 35, according to the Transamerica Center for Retirement Studies. By contrast, GenXers got started at a median age of 30, Millennials at 25, and GenZ at 20.

The difference between starting at 35 and starting at 20 is astronomical.  If you start at 20 and want a $1 million nest egg by 65, you’d have to save only $115.91 per month, assuming a 10% average annual return. if you start at 35, you must save $506.60 monthly. That’s a much bigger financial burden.

Can baby boomers overcome these disadvantages?

Baby Boomers can’t go back in time and learn about 401(k) accounts earlier or start saving at a younger age. But they do have a few options for overcoming the challenges they’ve been faced with. These include:

• Saving more. Boomers who can afford to invest a larger amount of each paycheck can make up for the late start by supersizing their retirement plan contributions.
• Working longer. Putting in some extra years on the job offers more time to build a bigger nest egg and reduces the period of reliance on retirement funds. This makes it easier to get by with less. It also enables a delayed Social Security claim, which can result in larger benefits.
• Living on less. For some Boomers, especially those already in retirement, living on a tighter budget or moving to an area with a lower cost of living will be the way to go to make a too-small investment account last longer.

To some extent, it’s up to Boomers which of these options they want to adopt to overcome challenges. However, if they don’t choose saving more or working longer, they may have no choice but to spend their retirement pinching pennies.

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