Personal Finance
How baby boomers can close a retirement savings gap
Many baby boomers aren’t on track to retire with enough money. They have some options to adjust their trajectory, researchers said, but these come with trade-offs.
Just 40% of workers who are age 61 to 65 — the youngest members of the boomer cohort — are financially on track for retirement, according to recent research from Vanguard, an asset manager and retirement plan administrator. That group will have enough income to fund their current lifestyle into retirement, researchers estimate.
The rest are expected to fall short. The typical — or, median — 61- to 65-year-old will have a $9,000 annual deficit in retirement, representing a 24% shortfall in their funding needs, Vanguard estimates.
Its analysis assumes people retire and claim Social Security at age 65.
The findings come as a historic demographic shift, known as “peak 65,” is underway in the U.S. A record number of people — more than 4 million a year, or about 11,000 a day — are expected to turn 65 annually from 2024 to 2027.
Of course, knowing the “right” amount of money needed to retire is an impossibility. No one knows how long they will live or how much money they might need for future retirement expenses, such as health care or long-term care.
Yet boomers who suspect they won’t be able to sustain their current standard of living are in a tough spot compared to younger generations.
Gen Z and millennials, for example, have decades to change course, perhaps by saving more for retirement and earning compound interest on those balances. Not so for near-retirees.
Compared to younger investors, boomers also generally hold fewer stocks — the typical growth engine of a retirement portfolio — to insulate their savings from market risk as they prepare to begin retirement withdrawals.
There may be negative implications for the U.S. economy if many boomers are ill-prepared for retirement and are forced to cut spending to make their nest eggs last.
“Some economists sound alarm bells: ‘We have this [retirement] crisis, it’s doom and gloom,'” said David Blanchett, a certified financial planner and head of retirement research at PGIM, an investment manager. “It’s not nearly as bad as it seems.”
Boomers do have a few options to help close any retirement-readiness gap. However, the options may not be accessible or palatable to all households, he said.
Here are three of them.
1. Working longer is a ‘silver bullet’
Nastasic | E+ | Getty Images
Delaying retirement is a “silver bullet” when it comes to eliminating or shrinking a retirement funding gap, Blanchett said.
“Even pushing back retirement back a few years can do wonders for retirement outcomes,” he said.
That’s because working longer would yield more career-funded savings, higher Social Security income for life due to delayed claiming, and fewer years of retirement to fund, according to Vanguard’s report.
For example, working two years longer — e.g., retiring and claiming Social Security benefits at age 67 — would increase the share of 61- to 65-year-olds who are prepared for retirement to 47% from 40%, Vanguard found.
However, not everyone will be able to work longer, even if this is something they plan to do.
“It’s not an option that’s available for all,” said Kelly Hahn, head of retirement research in Vanguard’s Investment Strategy Group.
In 2025, 40% of retirees said they left the workforce earlier than planned, according to the Employee Benefit Research Institute’s Retirement Confidence Survey. That share has been roughly similar for the past two decades, hovering around 40% to 50%.
Some of the reasons for an unexpectedly early exit include health problems and layoffs.
2. Address the ‘tricky topic’ of home equity
A “For Sale” sign in front of a home in Crockett, California, US, on Wednesday, Nov. 12, 2025.
David Paul Morris | Bloomberg | Getty Images
Among the reasons for boomers’ somewhat precarious financial position relative to younger generations: The workplace retirement system shifted from a pension-heavy system to a 401(k)-type system, right as young boomers were in their peak earning years, Hahn said.
“They didn’t really benefit fully from the pensions their parents or grandparents may have had,” or from the newer 401(k)-type system of savings, she said.
However, the bulk are sitting on a large non-liquid asset, Hahn said: their homes.
The vast majority — 86% — of baby boomers own homes, a much larger share than younger generations, according to Vanguard calculations based on the Federal Reserve’s most recent Survey of Consumer Finances.
The average boomer has $113,000 of home equity, according to Vanguard’s report.
Tapping into that equity would increase the share of young boomers financially prepared for retirement to 60%, up from the baseline 40%, researchers estimated.
There are many ways to access those funds, experts said.
“The one that will give you the biggest bang for your buck from a quantitative standpoint” is selling one’s home outright and becoming a renter instead of a homeowner, Hahn said.
Homeowners might also consider selling their current home and downsizing, moving to a lower-cost area, or borrowing against their home equity via a reverse mortgage or a home equity line of credit.
However, tapping home equity is often a “tricky topic,” Hahn said.
Most people are reluctant to turn to their home as a piggy bank, viewing it instead as an asset of last resort, Blanchett said.
“The home is the largest tangible asset for most Americans,” he said. “It’s a viable option in theory, but in the past it’s been relatively unpopular.”
Even pushing back retirement back a few years can do wonders for retirement outcomes.
David Blanchett
certified financial planner and head of retirement research at PGIM
A home generally comes with a strong emotional attachment to one’s identity, potentially making it difficult to sell, Hahn said.
Homeowners with a mortgage who secured their loan when rates were low may also feel locked in, given higher interest rates now, she said.
Additionally, accessing home equity via a reverse mortgage or HELOC can also be costly and time-consuming, Blanchett said. Homeowners need to get approved for the loan, which often comes with implicit or explicit costs, he said.
Social connectivity is also a “very important aspect of a happy retirement,” Blanchett said. Retirees would have to weigh the loss of their community and social network against the financial necessity of relocating, he said.
3. Spend less
Of course, people might also consider spending less both before and during retirement, Blanchett said.
Saving more money toward the tail end of one’s working years can help accomplish that goal by forcing households to live on reduced cash flow, he said.
The typical retiree experiences a 20% decline in their consumption when they enter retirement, perhaps because a lack of savings causes a reduction in their spending, according to Blanchett’s research.
However, data suggests about 90% are moderately or very satisfied with their retirement, he said.
“These responses strongly suggest that despite perceptions of a retirement crisis, retirees are relatively content,” he wrote.
The Federal Reserve held interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s last as chair before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers maintained the federal funds rate in a target range of 3.5% to 3.75%.
Inflation has surged since the war with Iran began, leaving policymakers with limited room to act, according to Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting. “We’re in a kind of suspended animation — between Iran and the Fed transition,” Snaith said.
Before the oil shock, inflation was holding above the Fed’s 2% target but not worsening. Now the jump in energy costs could have longer-term inflationary effects, economists say.
For Americans struggling in the face of higher gas prices and overall affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease budgetary pressures. “The cavalry isn’t coming anytime soon,” Snaith said.
How the Fed decision impacts you
The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a trickle-down effect on many consumer borrowing and savings rates.
Short-term rates are more closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term rate, so they track the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual percentage rate has stayed just under 20%, according to Bankrate.
“Without Fed rate cuts, there’s not much reason to expect meaningful declines anytime soon, so carrying a balance will remain very expensive,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage rates
Fixed mortgage rates, on the other hand, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
Concerns about how the Iran war will impact the U.S. economy have already pushed the average rate for a 30-year, fixed-rate mortgage up to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That leaves homeowners with existing low mortgage rates “feeling stuck,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Mortgages, more than any other credit type, work on a churn,” she said, referring to how a dip in rates can boost borrowing activity.
Student loans
Federal student loan rates are also fixed and based in part on the 10-year Treasury note, so most borrowers are somewhat shielded from Fed moves and recent economic uncertainty.
Current interest rates on undergraduate federal student loans made through June 30 are 6.39%, according to the U.S. Department of Education. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year note.
Car loans
Auto loan rates are tied to several factors, including the Fed’s benchmark. Because financing costs remain elevated, new car buyers are taking on longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Even so, with the rate on a five-year new car loan near 7%, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high.
“Car buyers are in a tough spot right now because they’re getting squeezed from both ends: high sticker prices and high interest rates, with neither showing any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the rate picture shifts, buyers will keep stretching loan terms to make payments work, which only adds to the total cost of ownership down the road,” Yoon said.
Savings rates
While the Fed has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate. So, although rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are holding above the annual rate of inflation.
For now, top-yielding online savings accounts and one-year CD rates pay around 4%, according to Bankrate.
“Yields on high-yield savings accounts and certificates of deposit are down from their peaks of a few years ago, but they’re still strong compared to what we’ve seen for most of the past decade,” Schulz said.
Milan Markovic | E+ | Getty Images
The average tax refund is 11.2% higher this season, compared with about the same period in 2025, according to the latest IRS filing data.
As of April 10, the average refund amount for individual filers was $3,397, up from $3,055 about one year ago, the IRS reported on Friday.
The IRS data reflects about 114 million individual returns received, out of about 164 million expected through Tax Day. Next week’s filing update is expected to include data through the April 15 deadline.
President Donald Trump‘s 2025 legislation, rebranded to the “working families tax cuts,” was a key talking point for Republicans on Tax Day.
With the November midterm elections approaching and Republicans defending slim majorities in Congress, many GOP lawmakers have highlighted Trump’s tax breaks and higher average refunds.
Meanwhile, affordability has been top of mind for many Americans amid rising costs of gas, electricity, food and other living expenses.
For filers who expected a refund this season, nearly one-quarter, or 23%, planned to use the funds to pay down credit card debt, and the same share said they would save the payment, according to the CNBC and SurveyMonkey Quarterly Money Survey, released in April. It polled 3,494 U.S. adults at the end of March.
Who benefited from Trump’s ‘big beautiful bill’
“It’s been a great tax season for the American people,” many of whom have benefited from Trump’s tax breaks, Treasury Secretary Scott Bessent said during a White House press briefing on Wednesday.
More than 53 million filers claimed at least one of Trump’s “signature new tax cuts” — the deductions for tip income, overtime earnings, seniors and auto loan interest — the Department of the Treasury also announced on Wednesday.
Those filers, who claimed the deductions on Schedule 1-A, have seen an average tax cut of over $800, according to the Treasury. Tax cuts can trigger a higher refund or reduce taxes owed, depending on the filer’s situation.
Some filers who itemize tax breaks have also seen benefits from the bigger federal deduction limit for state and local taxes, known as SALT. Trump’s legislation raised that cap to $40,000, up from $10,000, for 2025.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May 2025 analysis of various proposals from the Tax Foundation.
The Treasury has not released data on how many filers have claimed the SALT deduction during the 2026 filing season.
Traders work at the New York Stock Exchange on April 16, 2026.
NYSE
U.S. stocks climbed to record highs on Thursday against a backdrop of war, an oil supply shock and economic forecasts warning of stunted growth amid a protracted conflict.
Many investors may be thinking: Why?
Largely, it’s because the stock market is a barometer of what investors think will happen in the future, rather than an assessment of the present day, according to economists and market analysts.
Investors are essentially shrugging off the Middle East conflict as a blip that will be resolved relatively quickly, they said.
“The stock market isn’t trying to price what’s happening today,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. “The stock market is always trying to price what the world is going to look like six to 12 months from now.”
Why stocks have been ‘resilient’
The S&P 500, a U.S. stock index, fell about 8% in the initial weeks of the Iran war, from the start of the conflict on Feb. 28 to a recent low on March 30.
But stocks have rebounded since then, erasing all losses since the beginning of the war. The S&P 500 closed at an all-time high on Thursday — about 11% higher than its nadir at the end of March. That followed a record close on Wednesday.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
A ship waits to pass through the Strait of Hormuz following the two-week temporary ceasefire between the US and Iran, which is conditional on the opening of the strait, in Oman on April 8, 2026.
Shady Alassar | Anadolu | Getty Images
And while investors cheered the possibility of a diplomatic off-ramp to the conflict, the temporary ceasefire has appeared tenuous, with the U.S. and Iran each accusing the other of breaking the agreement.
Nations haven’t been able to reach a peace deal ahead of the ceasefire’s end. Vice President JD Vance said U.S. officials left peace talks in Pakistan over the weekend after the Iranian delegation refused to agree to American demands not to develop a nuclear weapon.
The markets ‘have memory’
Ultimately, the stock market is signaling a collective belief that tensions will ratchet down, the war will end in the near term and oil flows through the Strait of Hormuz will normalize, economists said.
That’s largely because investors have been conditioned to believe that President Donald Trump will back off if the economic pain becomes too intense, economists said — the so-called “TACO” trade, shorthand for “Trump always chickens out.”
“Investors strongly believe — and have been conditioned to believe — he’s going to stand down, find a way to pivot, declare victory and move on,” Zandi said.
Trump has pushed back on the notion of backing down, framing his brinkmanship as a savvy negotiating tactic.
Economists pointed to a recent example of this dynamic: in April 2025 during so-called liberation day, when the Trump administration levied a host of tariffs on U.S. trading partners.
Within days — after the stock market had cratered more than 12% — Trump announced a 90-day pause on those tariffs. Stocks then saw one of their biggest daily rallies in history following Trump’s reversal.
Investors remember that Trump often de-escalates geopolitical shocks — which is why they’ve seized on positive headlines that hint at progress in peace talks, for example, Seydl said.
“The markets have memory,” Seydl said.
AI stocks and the ‘tech boom’
Traders celebrating at the New York Stock Exchange on April 15, 2026, as the S&P 500 closed above the 7,000 level for the first time.
NYSE
There are other factors underpinning market resilience during wartime, economists said.
One is the investors’ enthusiasm for artificial intelligence and technology stocks, which account for almost half of the S&P 500’s market capitalization, Zandi said.
“Those stocks run on their own dynamic independent of anything, including the war in Iran,” Zandi said. “I think we would have been down a lot more and it would have been harder for us to recover had it not been for the very, very optimistic perspectives on AI.”
We’re in the middle of a “tech boom” — and investors are likely to remain optimistic until they think the tech cycle has run its course, Seydl said.
More broadly, stock investors are essentially making a bet on the future earnings growth of a company — and the earnings backdrop has been “pretty solid,” Seydl said.
Consumer spending appears to be stable, for example, economists said. And companies are getting a boost to their after-tax earnings from the GOP’s so-called “big beautiful bill,” which, among other things, made it easier to write off investments upfront and therefore reduce their tax liability, Zandi said.
Going forward
Experts said there will be an economic hit from the Iran war, though.
“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, wrote Tuesday.
A protracted conflict risks deep and global economic pain, he wrote.
Even if the conflict is short-lived — as the broad market expects — stocks are unlikely to march much higher until it’s clear the U.S. is on the other side of the war and its economic fallout, Zandi said.
If investors are incorrect, and President Trump doesn’t back down or quickly extricate the U.S. from the war, the stock market may see a “full-blown correction” or worse, Zandi said. A stock market correction is a decline of at least 10% from recent highs.
“Everyone thinks they know what the script is,” Zandi said. “Now they just need to follow the script. If they don’t, the market will have some real problems.”
The uncertainty provides yet another example of why the average investor with a long time horizon should stick to their investment plan and ignore the noise, experts said.
“Trying to time the market is very difficult if not impossible for the average investor,” Seydl said. “It’s better to take a long-term perspective and ride out bouts of volatility.”
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