Price inflation in the United States. Changes in COLA, Social Security and lack of savings. All of these factors are very influential in the lives of baby boomers. This is because they are at an exact age where they may not get to receive a good pension, so they have to look for different options. In this case, the 401(k) is a good option so that savings don’t disappear altogether.
But all indications are that even the 401 (k) won’t be enough for most of these baby boomers. The reason is quite simple: they will live longer than expected. Life expectancy has lengthened greatly in recent decades. So it’s quite possible that everything related to 401(k) savings may need to be reviewed to avoid unpleasant surprises.
Why are baby boomers’ savings running out?
CNBC has the facts on why baby boomers’ savings are running out fast. There are multiple reasons for this, but one of them is because prices have increased. This price increase makes the savings of many years worth less. Because of this, most people who chose to opt for a 401(k) instead of Social Security may run into problems at age 85.
The difference in monthly savings between a person’s 401(k) and Social Security is quite large. If you decided to choose the 401(k) option, you may need to save money for a while so that you don’t run into problems in the future. It’s a pretty tricky thing to do, but it is possible, especially if it’s not too late.
Differences between 401(k) and Social Security
When analyzing the difference between 401(k) and Social Security, we can use an example. CNBC highlights an example where a person starts retirement with $200,000 in savings. When they reach age 70, the person who chooses the 401(k) and not Social Security has $28,000 less.
At age 75, that same person may have $86,000 less relative to a person with the same savings who chooses Social Security. Therefore, we can conclude that you have to be very careful with these types of plans. If you have savings set aside and have not elected Social Security, allocate your money efficiently and do not squander it or you will have problems in future years.
