Personal Finance

6 Financial Tidal Waves That Could Unexpectedly Crush Baby Boomers

Maurie Backman

Published: February 12, 2025 6:59 am

A lot of people look forward to retirement only to find that it’s a more financially stressful period of life than expected. And a big part of the reason could boil down to being ill-prepared. With that in mind, here are a few factors that could hurt older Americans’ retirement — and what to do about them.

1. Rising healthcare costs

It’s not a secret that health issues tend to rise with age. But unfortunately, a lot of people underestimate their healthcare costs in retirement — and pay for it later.

Fidelity estimates that the average 65-year-old person retiring in 2024 needs $165,000 to cover healthcare expenses in retirement. So it’s important to plan for that accordingly. That could mean padding your IRA or 401(k), or reserving funds in a health savings account to use later in life.

It could also be smart to secure long-term care insurance, as that’s something Medicare typically won’t pay for. The $165,000 estimate above doesn’t include long-term care. And if you need it and don’t have the money for it, things could get ugly without some type of coverage in place.

2. A lack of retirement savings

As of 2022, the median savings for retirement was just $200,000 among Americans aged 65 to 74, per the Federal Reserve. And while that median balance has likely been bolstered by strong stock market gains these past couple of years, the reality is that many older Americans sorely lack adequate savings for retirement.

If you’re still working, consider extending your career for a few years if your nest egg could use a boost. It may not help you add to your savings so much as allow you to leave your existing savings untapped for longer, which could also be helpful. You may also want to work with a financial advisor to plan out a retirement budget based on your anticipated annual income.

3. A stock market crash

The stock market could experience a slump at any time. But that could be detrimental to your retirement finances, especially if a downturn occurs early on in retirement and you’re forced to take withdrawals from your portfolio during that time.

You can’t do anything to prevent a stock market crash. But you can set yourself up with a diversified portfolio that’s suitable for your age — one that’s able to withstand a prolonged stock market crash.

To this end, it’s helpful to work with a financial advisor. An advisor can help you choose an investment mix that’s designed to withstand a period of stock market declines. An advisor can also set you up with income-producing assets that could help offset losses in your portfolio.

4. Social Security cuts

Social Security gets most of its funding from payroll taxes. But in the coming years, that revenue stream could shrink as baby boomers retire in large numbers.

Social Security can tap its trust funds to keep up with benefits for a period of time. But once those trust funds run out of money, benefit cuts are a real possibility. And the program’s Trustees estimate that we may only be about 10 years away from that happening.

You clearly can’t control what happens to Social Security. And it’s worth noting that lawmakers may be able to prevent cuts as they’ve done in the past. But you can, and should, save more money so that you’re less reliant on those benefits once retirement rolls around.

You can also work with a financial advisor to claim Social Security strategically. That could mean delaying your filing for a boosted benefit for life.

5. Medicare cuts

Just as Social Security is facing cuts, so too is Medicare’s future somewhat uncertain. If Medicare cuts become necessary, it could result in fewer covered services and higher healthcare costs for seniors.

Once again, this is where added savings come in handy — either in the form of a larger IRA or 401(k) balance, or a health savings account whose balance you reserve for retirement. It’s also important to explore your Medicare coverage options every year in retirement, and consider changes during fall open enrollment as your health-related needs evolve.

6. A prolonged period of inflation

Following the pandemic, consumers on a whole had to grapple with a years-long period of rampant inflation. And it’s more than possible for that to happen again.

To avoid a scenario where inflation upends your retirement, make sure you’re invested in assets that have the potential to beat inflation, or at least keep pace with it. A financial advisor can help you assemble a portfolio that’s capable of doing this without having you take on undue risk, so it’s worth sitting down with a professional well ahead of retirement to get that guidance. Doing so could give you not only protection, but peace of mind.