Personal Finance

Baby Boomer Savings Are Being Eaten Alive Right Now

David Beren

Published: March 2, 2025 1:47 pm

One of the most essential truths facing baby boomers is that their savings are not sticking around as long as this generation might have hoped. Between inflation, increased medical costs, and simply not having enough savings, baby boomers no longer have enough cash to retire properly. 

Unfortunately, Social Security doesn’t provide enough income to support baby boomers as they retire. Rising housing costs are also a major concern as it could potentially have a greater impact on baby boomer savings than anything related to Social Security. 

Low Savings

According to the TransAmerica Center for Retirement Studies, baby boomers have an estimated median retirement savings of just $194,000. The same report indicated that only 44% of baby boomers had more than $250,000 in savings, while another 26% had less than $50,000. This is very alarming, and it’s hard to argue why one-quarter of baby boomers have such low savings. It doesn’t even matter to some extent other than to say there is no question that it won’t last. 

While the consensus varies slightly, the general rule of thumb is to save 8-10 years of your annual income before retiring. In other words, if you make $100,000 annually, your retirement savings should be around $800,000 to $1 million. 

Of course, for baby boomers who saw much of their savings wiped out during the Great Recession of 2008, a fear of the market didn’t allow them to rebuild what they once had. When a similar scenario played out between February and April 2020 as the COVID-19 pandemic began to shut down the world, fears of investing in the market once again left baby boomers unable to recoup their losses after panic selling. 

Rising Housing Costs

Rising housing costs are a major contributor to the concern that baby boomer savings are being eaten up faster than they are being replaced. Home prices have doubled in the past decade, which in turn is driving up property taxes significantly. Any increase in property taxes can harm savings, and there doesn’t appear to be any sign things will slow down. 

What’s worse is that insurance premiums, especially if you live in warm-weather climates like South Florida where baby boomers flock for retirement, have gone up significantly. Early indicators in Florida indicate that some retirees spend as much as one-third of their annual income on housing costs, which includes these hefty premiums. 

Of course, mortgages are one of the biggest concerns, especially considering that a $420,000 home would now require a $2,864 monthly payment in today’s economy. If you turned back the clock to pre-pandemic times in 2019, at a 4% interest rate, you would have saved around $650 or more on your monthly mortgage payment or approximately $8,000 less per year.  

Unfortunately, this financial strain has led some baby boomers to re-enter the workforce and or sell assets, which has only negatively impacted overall retirement security. 

Insurance Worries

Consider that the U.S. Census Bureau put out its American Community Survey, which indicated that the current income for a retiree in 2024 was just $31,390. Now assume that most insurance companies require that a house be insured for at least 80% of its cash value. The result is that rising housing prices majorly impact overall housing costs. This is especially true in warm-weather climates, where housing values are out of control, leading to ridiculously high-priced insurance, reducing the amount retirees have saved. 

Property Taxes

Diving a little deeper into property taxes, we look at Lanell Griffith and her husband, who bought a property in Topeka, Kansas, in 2022. At the time, the property tax bill on their home was $2,700, which felt very affordable. Fast-forward one year, and their costs jumped to $3,700, a $1,000 increase. With the expectation that 2024 will be over $4,000 just for property taxes and they will climb again in 2025, these unexpected costs are adding up and taking larger and larger bites out of retirement savings. 

Healthcare Expenses

There shouldn’t be any surprise that healthcare is one of the biggest expenses any retiree or baby boomer will incur during the later years of their life. Unfortunately, rising premiums and hefty out-of-pocket expenses that Medicare does not meet are increasing significantly. 

Baby boomers are among the most likely generation to incur chronic conditions, and this means plenty of unexpected costs are coming up. If you require ongoing treatments for a condition, you can expect a lot of cash to go out with not enough coming in to replace everything. 

This is especially true if you have to start thinking about long-term care, like a nursing home or in-home assistance, which Medicare does not cover. Unfortunately, for those who hoped that Social Security would provide a buffer against rising medical costs, it’s important to remember that Social Security is only expected to replace around 40% of your pre-retirement income, so it has to be paired with significant savings to feel comfortable that you can handle medical costs on an ongoing basis. 

Cost of Living

You can’t talk about baby boomer savings without saying how much inflation has eroded the buying power of not just baby boomers, but every generation. This means that everyday things like groceries, utilities, and gas for your car are all climbing faster than the current Social Security cost-of-living adjustments. 

If you are a baby boomer on a fixed income, you are in a pretty tricky situation as any desire to buy a new car or purchase a new home has to be all but crossed off your list. The bottom line is that you have to make some tough choices over how best to handle all of the essentials in your life, and depending on how much inflation is affecting you, there may not be a lot of room for entertainment. 

This reality is definitely being realized by those who reported in the TransAmerica survey that they saved less than $250,000. It should go without saying that their savings will be gone quickly as inflation feels like it’s here to stay, at least for the foreseeable future. 

What Can Be Done? 

With baby boomer savings looking more and more likely to continue getting eaten away by inflation and rising medical costs, it leads directly to the question of what can be done. 

One definite consideration is downsizing, which the baby boomer generation has already started to consider now that many are empty nesters. Any move to a smaller home will likely mean lower overall costs in the form of a smaller mortgage, lower property taxes, and significantly reduced utility bills. 

These things would stop the savings drain and hopefully allow baby boomers to start living more carefree again. The same can be said when considering relocating to a less expensive area. For anyone on a fixed income, relocating can lead to the same decrease in costs as downsizing, but maybe with the advantage of moving closer to family or warmer weather.