Why Boomers Are The LAST Generation to Retire

0:00 The boomers will be the last generation to retire in mass. After them, retirement will most likely be split into two realities. A small percentage of Americans will retire early and comfortably, but millions more will find themselves working longer, retiring later, and living on far less than they expected. And the reason why might surprise you. You see, retirement, as we often picture it, of golf carts, warm climates, free time, has only been around for two and a half generations, the GI, the silent, and now the boomer generation. Those are the only generations who have experienced mass retirement in the United States. And in that short amount of time, the system

0:46 that helps support their retirements has been coming under immense pressure. Pensions disappeared, people lived longer, families got stretched, housing became less affordable, and even social security got strained. And by the time Gen X starts reaching retirement age in 6 years, they may be the first generation that doesn't get to retire in mass. And in this video, I want to tell this story about why retirement might be dying with the boomers. And it all starts with understanding how new this idea of retirement actually is. Chapter one, retirement before the GI generation. So, as I just said, retirement as we know it in America has only existed for

1:31 two and a half generations and dates back to around the 1950s. The lost generation before them never retired in mass. Retirement might be the newest idea in modern history. And the reason people didn't retire before the 1950s was because there was no system to support it. The first social security checks weren't given out until the 1940s. Pensions were only common from the 40s to the 70s. Medicare wasn't offered until 1966. The 401k wasn't created until 1978. And the Roth IRA wasn't created until 1998. The entire system of retirement as we know it was invented in the last 90 years. And for generations before, retirement might look something like this. A multigenerational family lives together.

2:17 As you get older, you take on less demanding roles like watching the grandkids or helping out around the house. And once you can no longer do that, the family takes care of you until you pass. The original social security was having your family take care of you when old age made work impossible. However, it's also important to point out that the reason people didn't retire was also because many people didn't make it to old age. In fact, it wasn't until 1949 that the life expectancy was over 65 years old for both male and females. However, that number is a bit distorted because many people died at young age. If you did reach 65, the average male could expect 12 more years in 1949. Retirement is a shockingly new idea, and like most ideas, it was created out of

3:04 crisis. Chapter 2, the industrial problem. So around the 1800s, the nature of the household was drastically changing. People moved from farms living in multigenerational households to cities living in nuclear households, which really impacted elderly people because they now had lost that safety net that protected them when they were no longer able to work. And at the same time, working at old age was becoming increasingly difficult because jobs were becoming increasingly physically demanding. Instead of small family farms, people were working in backbreaking factories. And once workers got older and weaker, they were replaced by younger workers and then unable to find work. And these two things created

3:52 a growing social problem. Millions of elderly people found themselves unable to work but also unable to support themselves financially. In many ways, this new industrial society created a new phase of life where people were too old to work but still alive for many years afterwards. And because of that, old age became synonymous with financial instability. In fact, according to the Social Security Administration, in 1934, over 50% of seniors in America lacked sufficient income to be self-supporting, which forced society to answer a very difficult question. Who was going to take care of them? And that's a question that society still struggles to answer.

4:37 The first attempt at that question was the creation of social security in 1935, providing elderly Americans with a guaranteed source of income in old age. But this system didn't create the prosperous retirement that we imagine today. Instead, it was focused on addressing one thing, preventing elderly people from falling into poverty. Preventing poverty was the original goal of retirement. But eventually, Americans began to expect a lot more out of their retirement. But before we go there, I want to talk about a new tool that is helping people invest in their own retirement on Public, who is the sponsor of today's video. Some of you might not have heard yet, but the investing platform Public recently launched something called Generated Assets, and

5:24 it brings AI into investing in a way that I've never seen before. And this is how it works. You type in an investing idea like companies positioned to benefit from the retirement of the baby boomers and public's AI will analyze US stocks and build a custom index around your thesis. It's sort of like creating your own ETF. And in my Boomer index idea, it's largely composed of healthcare and financial companies, but it doesn't just build the index, but it also walks you through why it chose each company. For example, it chose Brookdale Senior Living because it's a leading operator of assisted living and retirement communities, standing to benefit significantly from the retirement of baby boomers. And before you invest, you can even back test your idea and compare it to the S&P 500, so

6:11 you're making decisions with real context. And on top of generated assets, Public also lets you invest in stocks, bonds, options, crypto, and more all in one place. And so if you want to build a portfolio that actually reflects your thesis, scan this QR code or click on the link in my description. And thank you public for sponsoring this video. Chapter 3, the reward of a lifetime. After World War II, the idea of retirement would shift from a thing that prevents senior poverty to a reward of a lifetime. And what made that transition possible was a benefit that was becoming increasingly popular in this era, pensions, which provided guaranteed income for life. After the war, workers

6:58 had more leverage to demand better benefits, which is why pensions became more common. And with that, retirement now was supported on three legs. Social Security, the pension, and personal savings along with home ownership that many had. Retirement was now a diversified portfolio. And the best part about it is that it required little intentionality from the workers. Social Security was automatically taken out of their paychecks and pension money was automatically set aside. So even if they entered retirement with little personal savings, those two things covered about 60 to 80% of their pre-retirement income. And this is what made retirement shift from preventing elderly poverty to a reward of a lifetime. Retirement

7:44 communities turned retirement into a lifestyle. Warmer climates became synonymous with retirement living and leisure became increasingly associated with old age. And this system became standard for the GI and silent generations. And this is when boomers enter the picture. They grew up watching their parents retire on this system and naturally came to expect that they would do the same and some of them would. However, what makes the boomer generation so unique is that they act as the transitional generation. They didn't fully get what their parents got. But they also weren't dealt the same hand that generations would experience afterwards. They got a mix between the old and new system. However, throughout their lifetimes, they would see that system that supported their parents'

8:31 retirement begin to crack. That would alter retirement for every generation that would come after. Starting with the very thing that transformed retirement from survival into a reward. Chapter 4, the 401k shift. Now, although the pension seemed like this perfect solution for retirement, in reality, as time passed and the economy changed, it would prove to be a very unsustainable system for companies. They were expensive, required a lot of paperwork, and were very unpredictable. Promising workers a lifetime of income could mean 10 years or 30 years. But even to workers, pensions weren't the deal of a lifetime that they sounded like because they required you to stay

9:17 loyal at a single company for your entire career. So even if you hated your job, you stayed to keep your pension. And not to mention, you could be laid off or your company could go bankrupt and it would affect your retirement. And by the 70s, because they were so expensive for companies and workers were beginning to lose leverage, companies began to search for a cheaper alternative. And what they found was the 401k where instead of guaranteeing an income for life, they could just put in some money to this account along with the worker and the worker would invest it as they like. And this was a huge benefit for companies because it shifted the risk and responsibility from companies to individuals. Now employers had no long-term responsibilities.

10:04 Instead, workers had to decide how much to save, what to invest in, and how much risk to take. And although this sounds like a raw deal for workers, it did come with benefits. The 401k gave workers flexibility to move jobs. And if they made the right financial decisions, they could potentially have a more luxurious retirement. And once again, the boomer generation found themselves caught up in this transition. Those born in the first half of the generation had already accumulated years of pension benefits before they started to disappear. Whereas those borns in the second half often had to build their retirement primarily through 401ks with no previous generations knowing how to do so. And this is where retirement outcomes would start to be highly unequal because under

10:52 the pension system, loyalty and hard work led to a comfortable retirement. But under the 401k system, financial knowledge and initiative would lead to a comfortable retirement. For the first time in its very short history, retirement became something that you had to actively plan as an individual rather than something that was just happening in the background. But at the same time, something else was happening that would make retirement a lot more difficult. Chapter 5, the life expectancy boom. Now, what most people don't consider when talking about why retirement worked better in the past was that retirement didn't last 25 to 30 years like it does today, but it lasted 10 to 15 years. You

11:37 see, throughout the 20th century, a series of medical breakthroughs drastically increased life expectancy. Advanced medicines, replacement surgeries, and advanced specialists. I mean, think about a senior that you know, they're probably taking multiple pills a week, go through a few surgeries in their retirement years, and regularly visit the doctor. Most of the things that would have ended a retireese's life 50 years ago are now manageable conditions. And while that's an incredible achievement, it also created a massive problem for retirement because every one of those legs that was supporting retirement now had to support them for two to three times as long. Social Security had to send checks for

12:22 longer. Pensions had to support retirees for longer. Medicare had to pay out for more years of care. and personal savings had to last for decades instead of just years. And once again, the baby boomers were the generation caught up in between these two worlds. They were among the first generation to experience much longer retirements, but they did so while many of the institutions supporting retirement were still largely intact. However, for future generations, the math would become a lot more difficult. But living longer didn't just make retirement more expensive, but it also created problems in the most important years leading up for retirement. Chapter six, the sandwich generation squeeze.

13:09 Now, these two things that we just spoke about, retirement planning shifting from individual responsibility and increased life expecties unintentionally created a new problem. And unlike the previous problems, this one wouldn't happen at retirement, but people would experience it in midlife. And boomers were the first generation to experience it. As they reach midlife, many found themselves helping aging parents who were living longer while also supporting children who remained financially dependent for longer. Sociologists call this the sandwich generation. And this created a major problem because your 40s and 50s are some of the most important years when it comes to retirement planning. They're the years when you're

13:56 supposed to be paying off all your debt. Investing aggressively and preparing for the day you eventually stop working. But instead of entirely focusing on your own retirement, you have to focus on supporting other generations, which delays your retirement planning. And as future generations will have to navigate a more individualistic retirement, they will also have to do so while being squeezed at midlife. Yet, despite all these changes, many boomers were still able to retire in some way. And ironically, the final thing that allowed them to retire is something that future generations most likely won't have. Chapter 7, the Boomer saving grace. Now, it's easy to look back on history

14:42 and think that boomers were able to retire because they lucked out on timing. But the truth is, many of them didn't. Many never got pensions, had to navigate 401ks with no guidance, had to fund much longer retirements, and were squeezed at midlife. In fact, the median boomer is pretty cash poor. According to the Federal Reserve, the median boomer only has $200,000 in retirement accounts. And on top of social security, that's only about $2,750 a month. Yet, despite that, many were able to retire, if even at a basic level. And the question is, how? And the answer to that is housing. The median boomer has $250,000 in home equity. And that home equity

15:29 help fill in the gaps of their already shaky retirement. Firstly, when you own a home, you get rid of your biggest expense, making living off primarily social security possible. In addition, you can access that equity in a number of ways to generate money, like downsizing a reverse mortgage or turn it into a rental. It was their saving grace as the transitional generation. However, with home prices at highs and people buying homes much later in life, this won't be an option for most people of future generations helping them out in retirement. And so for future generations with no pensions, less personal savings, long retirements, and no affordable housing, they will increasingly rely on Social Security as their primary retirement plan. However,

16:16 the exact year this next generation will be eligible to receive it is the exact year that that system will come under immense pressure. Chapter 8, the Social Security Crisis. The next generation to reach retirement age is Gen X from 2032 to 2047 claiming full retirement. And Gen X was the first true generation to live entirely in this new retirement system. They never got a chance at the three-legged stool. They never had an option for pensions. And many have less savings than boomers, while they're also still working off paying off their homes while currently facing the sandwich generation squeeze. And so for many of them in generations

17:01 after their retirement will be supported on one single leg, social security, which as we discussed in chapter 2 was never meant to support retirement, but it was meant to prevent senior poverty. And today, the medium payment is about $2,100, which is definitely not enough money with a mortgage. But even this final leg is beginning to come under immense pressure as the Social Security trust fund is projected to run out in 2032. But this doesn't mean that future generations won't receive Social Security money. But what it means is that if this is not addressed, future generations will receive a smaller percentage than they were promised. Because once the trust fund runs out,

17:47 money will continue to come in from people paying into the system. But it won't be enough to cover 100% of the benefit amount. Instead, it will only cover 76 to 80%, making an already small $2,100 check $1600. And that's why the boomer generation might be the final generation to retire in mass as the transitional generation. They might have experienced one of the many benefits their parents received, but every generation after had to navigate retirement all on their own. And naturally, when people are expected to do that, you're going to have a small percentage of people who were prepared and a much larger percentage that didn't. In many ways, retirement might be returning to what it has been for

18:33 most of history. Something for the fortunate few and not an expectation for the masses. And so, let's finish this video off with chapter nine. Where do we go from here? As the researcher of these videos, what continues to shock me is how new these systems that we assume have been around forever are actually extremely new. I mean, the system of retirement is only 2 and 1/2 generations old. Yet, we act as if it's been around forever. Retirement has never been the norm, but it's a product of a unique set of conditions and a brief moment of history. And after uncovering this very short story, I want to finish this video off with my three takeaways from making it. One, mass

19:19 retirement was possible because the system did most of the heavy lifting. Retirement worked in the past not because people made better financial decisions, but because the system did most of the heavy lifting. People could just live their lives while contributing to social security, building pensions, and accumulating home equity. What made retirement possible for the masses wasn't because of individual decisions, but it was because of systematic decisions. Two, retirement works best when responsibility is shared. What made retirement work so well in the past was that responsibility wasn't concentrated in one entity, but it was spread out between a few. The government, employers, and individuals held up the

20:04 stool. Retirement in really any system in this world becomes far more fragile when it's supported by just one thing, whether that's the government or individuals. And finally, don't expect to get what your parents got. The world often changes faster than we recognize. Every decade is drastically different than the one before. And so, don't plan to get what your parents got because you most likely won't. Thank you so much for watching this. I hope you enjoyed it. If you did, please like, subscribe. I'd love to hear your thoughts down in the comments section. And if you want to hear another very interesting story about Generation Jones, the forgotten half of the boomers, give this video a watch next. And with that, Mo.