Why Baby Boomers Aren’t Prepared For Retirement

There’s been a lot of speculation recently about why baby boomers are so unprepared for retirement.  It’s said that more than half do not have enough savings and will have to rely entirely on social programs that will be quite meager at best.  Do we have to develop a taste for canned cat food?

Why are boomers so ill prepared?  I have some thoughts from my own experiences.  I am in no way giving excuses and others may have different opinions from having lived through different circumstances.

Growing Up

Just as I can’t imagine how my parents lived through the Great Depression and the Second World War, later generations should not speculate about the boomer years.  Living in times of lack made my parents very frugal, which made life rather lean growing up.  There were no unnecessary purchases and things were bought to last.

As an example, my clothes were always purchased one size bigger and I wore them until they were one size smaller, giving me just a small window of opportunity to have them fit properly.

It’s no wonder that once I started working I bought clothes and more clothes.

Inflation rears its ugly head

No one in later generations experienced the same rampant inflation that occurred during the eighties.  While our parents saved up for major purchases, we were advised to buy on credit because prices would increase astronomically before we could save the money required.

I’ll give you an example of how quickly interest rates increased.  When we purchased our first house (when I was 22) we took a 5-year term at 10.5%.  The mortgage renewed at 17%.  Our neighbours who moved-in to their home about three months after we did faced a renewal rate of 22%!

Around this time credit cards were making a strong appearance.  Most banks were heavily involved in promoting their CHARGEX cards (now VISA).

These were the boomers’ buying years – house, furniture, cars and we paid big time if they were bought on credit.  It was the culture at the time.

It is the same mindset that had us taking out home equity loans when our houses increased so much in value.  Unfortunately, debt will be the biggest problem for many people entering their retirement years.

Meanwhile our parents were now in their savings years and benefitted from these high interest rates in GIC’s and Canada Savings Bonds.  They are known as the big savings generation.


Once we got into savings mode, interest rates on typical bank vehicles were 5% or less.  We took to mutual funds with huge enthusiasm expecting great returns.  Then came the market crash of 1987, the “Asian Flu” in 1998, the tech stock collapse in 2000 and, more recently, the mortgage fiasco in 2008.

Many unfortunates had their investments severely decimated and had difficulty rebounding from their losses.

RRSP Contributions

Although RRSPs were first introduced in 1957, they didn’t become a mainstream investment vehicle until the 1980’s.  However, low and middle-income earners had difficulty contributing a meaningful amount.  Apparently the tax savings were not sufficient incentive.

Even today, only 25% of tax filers make a contribution and the median amount is $2,790.  I’d like to see the results of a survey of current 30-year olds to see how much they are saving for retirement.

People are advised to maximize their RRSP contributions in their higher income years.  This was not possible for the many workers who were “made redundant” when businesses downsized and restructured during the economic recession in the 1990’s.

Workers in their 50’s and early 60’s had difficulty finding comparable paying employment at a time when they still had other financial obligations.  It’s no wonder RRSP contributions fell considerably during this time.

Social benefits

When CPP and seniors retirement benefits were introduced life expectancy was in the 60’s.  Somehow, to the government at the time, it seemed a no brainer to have the working generation fund the benefits of the retired for a few years.

Was it unexpected that the largest single generation would eventually retire at the same time that life expectancy increased substantially?

We saw our parents taken care of with workplace defined benefit pensions and CPP and we expected much the same thing.

What’s in store?

Given the experiences of the baby boomers, I think the question should be – how did the other 50% manage to accumulate enough savings for retirement?

Personally, I haven’t saved nearly the amount recommended by the “financial experts”.  I don’t need $65,000 a year to live on.  Most of my investments are in blue chip dividend paying stocks from which I will have extra income while preserving the capital for as long as possible.

I am not adverse to working part-time if need be.  I am confident that I will be able to deal with any unexpected hardships (I’ve done it all my life).

I’m not worried.

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  1. WorkSaveLive on April 10, 2012 at 7:17 am

    Some of your assessments are right on. I’m not so much concerned with the boomers as I’m concerned with people in my generation that may be without social security (in the US).

    At least boomers have something to help supplement their retirement income…

  2. Sharon Ireland on April 10, 2012 at 8:04 am

    Your experience is that of many I suspect, mine included. Most of my clothes were hand-me-downs, lunch was one slice of balogna on white bread etc… I marvel at how they managed to support a house and family with 2 children on one salary. We did get a rental cottage vacation each year, but basically, we made do with what we had. So when it was my earning years, I sure did learn how to spend. Unfortunately, I am paying for those good years now. I know I will not catch up.

  3. Francoise on April 10, 2012 at 8:23 am

    “Why are boomers so ill prepared? ”

    Simple answer. Many of us do not earn enough, period. When you earned a university degree but it did you no good in the job market. When you are living paycheque to paycheque in a declining job market, when rents keep going up and up, when gas increases to astronomical prices, when you have to pay car upkeep (and no, there is no transit to where I work and I have a degenerative disease and dare not quit this job because it has disability and I will never get that benefit in a new job), when you don’t get any increases at work, not even cost of living, when there is no pension plan at work and the profit sharing dried up because the company you work for is on the brink, when you simply do not have anything left over to save. No wonder I am terrified for my future.

  4. krantcents on April 10, 2012 at 8:39 am

    Unfortunately, it is too common that people are not thinking about saving for retirement. The trend is leaning on the younger generation to support them. This is building a house of cards that will crumble with the slightest breeze. I was always a saver and reached financial independence in my late thirties. You have a different perspective when you have enough money to live into old age.

  5. hughes1958 on April 10, 2012 at 11:59 am

    Excellent Article. Really captured it in a nutshell. As a late baby boomer married to an early baby boomer (soon to retire) I have one last gripe! After all this generation has had to listen to over the years that has been proven wrong (time & time again), it is truly galling that boomers continue to be condescended to by the “financial wizards” & treated like they are stupid for not being in better financial shape.

  6. Tackling Our Debt on April 10, 2012 at 7:19 pm

    Your article reflects my upbringing. My parents lived through the Great Depression and the Second World War, and escaped from Europe while they were still teenagers. They had no idea where they were going. They just ran!

    In Canada they worked hard and led a very frugal life. They didn’t discuss money in front of us kids, but some nights we ate pancakes for dinner and other nights we had steaks, so we figured it wasn’t too bad. May Dad only bought a new car every 12 years or so and always paid cash. They both invested well, but as you said, at one point in the 80’s interest rates were 22%. I remember collecting 22% interest on my bank account when I was 18. I used it to page my college tuition fees.

    As soon as I graduated from college I remember finding this credit card application at the school that allowed you to apply for 10 different cards at once. I did, at 20 years old.

    My over spending started in my 30’s . Buying stuff that we didn’t have in our family home, but I felt I needed. You are right, it was the culture at the time and I fell for it.

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