Retirement bills are rising as boomers leave the workforce
By mid-2025, Americans had $45.8 trillion in individual retirement accounts, 401(k)s, pension funds and annuities. That was nearly double the total from a decade earlier, the Times said reportedquote facts of the Institute for Investment Companies.
Strong market performance drove much of the growth, but higher participation and contribution rates in workplace plans also played a role.
Most of the new assets have flowed into 401(k)s and individual retirement accounts. IRAs have owned more assets than workplace plans for five straight years, largely due to rollovers as baby boomers retire, says Peter Brady, senior economic adviser at the Investment Company Institute.
“That’s where a lot of the action is happening now, and a lot of competition as people retire,” Brady told the Times.
Among employees with access to a 401(k), participation has risen to 85% Forefront. The average savings rate was 7.7% of wages in 2024 – helped by automatic enrollment and automatic premium increases.
Combined contributions from employees and employers now average about 12% of wages, up from 10.8% in 2015. Target date funds have become dominant and automatically shift investments as workers age.
At Vanguard, 84% of participants used these funds in 2024.
Later retirements, smooth work closures
Americans also work longer.
Men now retire on average at the age of 64 three years later than in the mid-1990s, the newspaper said Center for Pension Research at Boston College. Women’s retirement age has risen even more sharply, to 62.6 years in 2024, compared to around 55 years in the 1960s.
The age at which people claim Social Security has risen by roughly two years since the mid-1990s — even during the COVID-19 pandemic.
“Many people were eventually able to work from home, and for certain types of workers that could even delay their retirement,” Anqi Chen, the center’s deputy director of savings and household finance, told the Times.
About 40% of Social Security beneficiaries continue to work after filing for benefits.
“People are moving in and out of retirement,” Chen said. “It may have to do with their health, or with their economic or family situation, but some people find it difficult to actually pay for their pension.”
By 2026, employees can contribute up to $24,500 to a 401(k), plus an $8,000 catch-up for those age 50 and older.
Employees aged 60 to 63 can make a ‘super catch-up contribution’ of up to $11,250. Higher earners must make catch-up contributions as Roth IRA contributions. The IRA limits increased to $7,500, with a catch-up of $1,100.
Healthcare and long-term care are putting pressure on budgets
The costs outside of retirement accounts are large.
Some early retirees face an average increase of $11,000 in annual health insurance premiums as expanded Affordable Care Act subsidies expire.
A 64-year-old just above the subsidy limit would do that pay about $16,500 one year for coverage, according to KFF.
“It is the pre-Medicare population that will be hit hardest with higher premiums if the increased subsidies are not extended,” said Tricia Neuman, senior vice president at KFF.
Medicare premiums are also rising, with administrators predicting continued increases over the next decade. Long-term care costs remain shockingly high: $10,650 per month for a private nursing home room by 2024, according to ZorgScout.
About 15% of older people lived in poverty in 2024, up from 10.7% in 2021 – the only age group to see an increase.
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