Dec 29, 2017 3 min read

Every day, 10,000 baby boomers turn age 65. The first boomers began reaching retirement age about six years ago. The youngest have about 14 more years to work. These younger boomers will be facing more challenges than the older ones.

In 1975, 88 percent of all private sector workers had a defined benefits pension plan. According to Boston College, only about 33 percent of companies offer these today. Many plans were frozen after 2006 when the Pension Protection Act took effect. Younger boomers did not benefit as much from these pensions. Many companies switched from pension plans to 401(k)s. Using the 4 percent rule, someone would have to save $750,000 to receive the equivalent of a $30,000 per year pension. A recent study found 40 percent of people on the cusp of retirement had less than $10,000 saved. This is a real crisis.

Boomers born after Jan. 2, 1954 cannot take advantage of the Social Security, file and suspend other restrictive application rules. These rules allowed some older beneficiaries to maximize their Social Security income. Restrictive applications allowed someone to collect benefits from a spouse while letting their own grow 8 percent per year. Also, the age for anyone born after 1960 to reach full retirement age is 67. This means these recipients suffer more severe penalties for starting Social Security at age 62 and can only get 24 percent more for waiting until age 70 to start benefits. People born before 1954 would receive 32 percent more by waiting until age 70. Remember the earnings test applies until you reach full retirement age, so younger boomers face this challenge.

Younger boomers may still be dealing with college tuition for their children. Tuition, fees and room and board for one year at a private nonprofit four-year college was $29,530 in 1997. Today it is $46,950, according to the College Board. Many parents take on debt or defer saving for retirement to help with these costs. There are a number of ways to finance college, but none to finance retirement. However, it is not just college expenses later boomers are facing from their children. Even though there has been some economic pickup, many children are still living at home. Many stay on their parent’s health care plan until age 26. While the ACA gave them this option, it is an additional cost many parents are picking up.

Later boomers probably will earn much smaller returns from the stock market than early boomers. We have had an eight-year bull market in stocks and a 35-year bull market for bonds. Both of these are likely to change soon. Research Affiliates forecast a 60/40 portfolio of stocks and bonds will only earn a 0.6 percent inflation-adjusted return for the next decade. Vanguard has a similar outlook, believing a balanced portfolio will have the lowest expected return in 10 years.

Younger boomers need to start making adjustments now. Control spending and plan to save more. Be sure to take advantage of employer matches when available. Retirement plans may have to be delayed. An extra year or two of work lets Social Security and 401(k) savings grow and reduces the number of years you must live off retirement income. The beginning of the new year is an excellent time to make changes.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, contact business editor Michael Bradwell at mbradwell@observer-reporter.com.