Baby Boomers planned to retire in a world that no longer exists.
In just three days, three major financial institutions released new reports suggesting that retirement is more out of reach than it was before the pandemic. The findings reveal a troubling pattern:
- An increase in hardship withdrawals from retirement accounts
- One in four Baby Boomers has no retirement savings
- Nearly half of Americans fear they’ll outlive their money, according to Northwestern Mutual
“More than half of Americans believe outliving their life savings is a real possibility, and the vast majority are living with financial anxiety,” said John Roberts, an executive with Northwestern Mutual.
Rising inflation, higher tariffs, and ongoing economic uncertainty have squeezed household budgets, prompting many older Americans to dip into their retirement savings well before they stop working.
Hardship withdrawals on the rise
A 401(k) hardship withdrawal is designed to meet “immediate and heavy financial need,” as defined by the IRS.
That means an increasing number of Americans are relying on their retirement savings to make ends meet, which is not a smart financial move. Hardship withdrawals often come with a 10% penalty if you’re under age 59 ½, and contributions may be suspended for six months, permanently reducing retirement savings.
The CEO of Empower, the second-largest retirement plan provider in the United States, announced that 401(k) hardship withdrawals are 15% to 20% above historical averages. A report from Vanguard echoes the same trend: 4.8% of plan participants requested a hardship withdrawal last year, a jump from 3.6% in 2023.
The average 401(k) loan amount has also increased by 4%, according to T. Rowe Price, an investment and retirement firm. Most of their 401(k) participants lack sufficient emergency savings to cover six months of expenses.
What’s left to live on?
More than half of Americans are scared they will outlive their savings – 40% of them are already old enough to retire.
Most Americans about to turn 65 don’t have enough to retire comfortably, and a quarter of those 59 and older don’t have any retirement savings at all. This is despite a $200,000 drop in savings targets.
Nearly 4 in 10 Americans withdraw funds from their retirement accounts.
“Today’s workers are stuck between a rock and a hard place,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS, in a release. “They are traversing disruptions in the economy, a tenuous employment market, and the high cost of everyday living, while being expected to self-fund a greater portion of their retirement income compared with prior generations.”
Boomers are also dealing with debt, ranking second in the country with the second-highest average credit card debt and first with the most student loan debt.
Northwestern revealed that Americans’ top concerns about retirement include inflation. Add to the mix unpredictable tariffs, diminishing Social Security benefits, and a heavy debt load, and it’s no wonder many Boomers may retire with nothing.
Financial experts recommend delaying Social Security benefits until age 70 to protect retirement savings, increase emergency savings, and budget for healthcare expenses.
