Buck Up, Boomers. You're Still Better Off Than Your Parents.

This is a hard time to retire. The market is down 7% from last year and the rate of inflation has risen to 8.5%. Both are brutal to your bottom line when you're on a fixed income. But buck up! As bad as things seem, odds are you are in better shape than your parents or grandparents. And if they got through retirement comfortably, so will you.

If there were a golden age of retirement, it would be now. For most of human history people worked until they were physically unable, and then spent the remainder of their lives either poor or dependent on family. This changed in the early to mid-20th century when many economically developed countries adopted various pension programs that paid income through retirement. The U.S. pays Social Security benefits and also offers tax incentives for employers to offer retirement plans.

It's tempting to idealize the 1960s and 70s, when companies mainly offered traditional pension plans that paid a stable income until you died. But taking on all the market and longevity risk of workers was expensive for employers. Once companies were required to adequately fund their pensions to account for that risk, most dropped them. A notable exception is the public-sector employers who follow different accounting standards (that don’t account for risk) and still offer traditional pensions.

But even at their peak, only about 38% of private-sector workers had a defined benefit plan and many of them were higher earners, leaving most Americans to fend for themselves. When cheaper solutions became available — as in, defined contribution plans such as a 401(k) — retirement benefits became more common. In 2019 about 57% of U.S. workers had some form of a retirement plan.

Greater access to retirement accounts means people are retiring with more money than before. The figure below plots the average financial asset balance of Americans between age 65 and 69 from 1989 to 2019. This includes all retirement accounts, pension plans, bank accounts, stock portfolios and any other financial assets. Of course, many people still don't have access to retirement accounts through their jobs, or don't have extra income to save. But most retirees have a lot more money than they used to.