As the retirement landscape in America continues to evolve, baby boomers are finding themselves facing a future where many are unsure if their savings will last. Yet, not too long ago a stable, secure retirement was well within reach for many working Americans. Thus, it’s logical to ask the question, how did we get here?
The world has changed tremendously over the past 70 yearsstarting around the time Social Security was createdincluding the way we save for retirement. Unfortunately, more recent history has created some bad savings habits that could very well define the retirement future of the next generation of workers. Not only do boomers have to worry about their own financial future, they need to be concerned about how their children and grandchildren view saving for retirement based on their example.
But history doesn’t have to repeat itself. Some small changes in behavior from boomers today can help to set a solid foundation for building the more secure retirement plans of tomorrow. In that way, we can follow the “good” savings examples and bury the “bad” and “ugly” habits we should avoid.
Shaped by events such as the Great Depression and World War II, the so-called “Greatest Generation” took a cautious approach to financial planning, investing and preparing for retirement. The creation of the Federal Deposit Insurance Corporation in 1935 to help protect bank savings, as well as the inception of Social Security to provide a base level of financial support in retirementalong with general insecurity about the marketsled many of that generation to want rock-solid guarantees and safety in their financial planning. It also led many to be attracted to companies that offered a defined benefit (DB) plan in the form of an employer-sponsored pension to provide their retirement security.