Golden Years in Retreat: Wealthy Boomers Save for a Long Future

A new study by Prudential Financial reveals a surprising trend among affluent baby boomers entering retirement. Despite having solid savings, many prefer to live modestly rather than fully enjoying life in their later years. This caution is fueled by the prospect of potentially living into their 90s and managing the increasing costs associated with such longevity. The study, which surveyed approximately 20,000 individuals over the age of 50, indicates that particularly married 65-year-olds with savings of at least $100,000 withdraw on average only 2.1% of their savings per year. This is almost half of what retirees typically spend. According to David Blanchett of PGIM DC Solutions, historically it has been possible to spend 4% of savings annually without the risk of depleting assets within 30 years. However, the reality of living longer and rising costs makes it challenging for many to maintain this lifestyle. Researchers refer to this phenomenon as the "retirement consumption puzzle." Despite decades of wealth accumulation, many retirees find the upcoming years without work financially challenging and prefer to keep saving rather than enjoying their savings. This trend contradicts the common belief that baby boomers, who hold more than half of the wealth in the U.S., lead a carefree retirement life. In fact, in 2022, fewer than half of all baby boomers had saved enough for retirement, and 43% of individuals aged 55 to 64 had no savings at all. Nearly a third of those over 65 were economically insecure, earning less than $27,180 per year. It is, therefore, not surprising that many boomers are taking the step back into the workforce to fulfill their retirement aspirations. The trend of "unretiring" is increasing worldwide, particularly gaining traction in the UK and the US, as current figures show.