Transcription
America's largest generation is reaching retirement age, and millions of them are dead broke. I mean, according to the Federal Reserve Board, in 2022, 43% of Americans 55 to 64 had nothing saved for retirement. And for those who did manage to save, it isn't much. The median retirement balance for boomers is $22,000. And under the 4% rule, that's $670 a month. Add in social security and subtract Medicare, they have a total of $2316 a month to live on. And in this economy, that is barely enough to survive on, let alone retire.
Which is why more and more boomers are being forced to stay in the workforce. I mean, since 1985, the share of Americans over 65 who are still working has doubled from 10.8% to 20.2%. Which is shocking because this is the generation that supposedly had it all. Cheap college, affordable housing, stable jobs, and decades of economic growth. And so, the question of this video is, how did America's most fortunate generation retire broke? What were the events that led the boomers to be so unprepared at retirement age? Well, in this video, that's the story I want to tell. Because boomers didn't just wake up broke at 65, but it is a long, complex story of decades of getting screwed over again and again and again.
And so, as it is with all stories, in order to understand the ending, we first need to go back to the beginning because the idea of retirement in America is actually newer than most people realize. And as it turns out, the boomers were actually the guinea pigs.
Chapter one, the very short history of retirement before the boomers. Oftentimes when we talk about retirement, we act as if it's been around forever. However, the truth is retirement is actually a very new concept that is less than 100 years old. And when the first boomers were born, that concept was only 11 years old. And so, let me start off this story by telling you the very short history of retirement before the boomers. And I got to warn you, it's pretty short.
Now, for most of history, retirement didn't exist. You either worked until you died or had family take care of you right before you died. The first glimpse of retirement appeared in 1875 when American Express, the then freight and shipping company, offered the first ever private pension plan. If you worked there for 20 years, you could retire at 60 with half your salary. However, this first concept of retirement wasn't available for the masses. But it was for managers and executives.
Retirement for the masses didn't arrive until 1935, 11 years before the first boomers were born, when FDR signed the Social Security Act. This social security measure gives at least some protection to 30 million of our citizens. And let me remind you, 1935 was only 90 years ago. But by 1940, 6 years before the first boomers arrived, the very first social security check was sent out. And so that is the very short history of retirement before the boomers.
They were born right after social security started. However, they were also born during the post-war boom when many companies offered private pension plans. And so, the parents of the boomers were really the first generation to realistically be able to retire. And many boomers thought that they would follow the same road map as their parents: work hard, get a pension, pay into social security, and retire comfortably at 65. But very quickly, it became clear that that system wouldn't work for them.
Chapter 2, the pioneers of retirement. Nowadays, there is a set road map of what you need to do in order to retire comfortably. Start in your 20s, open up a 401k, a Roth IRA, invest in index funds, and hold for 30 years. That is today's millionaire blueprint. However, when boomers first started their career, none of that stuff existed yet. In 1966, the oldest boomers were 20, just starting their career. But the 401k wasn't created until 1978. The index fund, 1978. The Roth IRA, 1998. And back then, there were no apps or online brokers. If you wanted to invest, you had to call a stock broker, pay high fees, and usually pick individual stocks, which was a very intimidating experience. Something that the average 20-year-old would probably avoid doing. There was no infrastructure yet.
The only system that boomers had was that of their parents. Work hard, get a pension, pay into social security, and retire at 65. But shortly into their careers, it became apparent that that system wasn't going to hold up. In the 1960s, many pension funds were starting to fail. One of the most famous cases was with the car brand Studebaker. In 1963, they shut down their South Bend, Indiana plant, and thousands of workers lost their pensions. And that was the first time when Americans realized that decades of hard work could end with nothing. And in the years that followed, pensions began to fade and companies began looking for cheaper alternatives. So boomers started their career realizing that that old road map wouldn't work anymore. And they were forced to pioneer the system that we have today. But the truth is, even if they had the system that we have today, it wouldn't matter because for 16 years, the stock market went absolutely nowhere.
Chapter 3, the death of equities. If you were to get advice from someone my age on what you need to do in order to retire a millionaire, the advice would probably be this: start investing in your 20s. On average, you'll see a 10% return a year, and by 65, your money will compound to millions. Someone from my generation would say that the stock market is the number one tool to build wealth. And the reason that we'd say that is because throughout our adult lives, the market has consistently gone up. In fact, if I invested $1,000 at age 20, 12 years later, my investment would have grown to about $2,120 with inflation calculated. For people my age, we have a very optimistic view of the stock market.
But if you were starting to invest in the late 60s, like many boomers should have, you would have created a completely different view of the stock market. From 1966 to 1982, the stock market went absolutely nowhere. It was a straight line for 16 years. I mean, you would actually be losing money by investing in the stock market. For example, let's say a 20-year-old boomer invests $1,000 in 1966. By 1982, with inflation calculated, it would be worth around $500. By following the strategies of today and holding for the long run, you would have lost money for a 16-year period. The stock market went absolutely nowhere. So much so that the famous Business Week cover story titled "The Death of Equities" declared that stocks were essentially dead as an investment.
And so, unlike my generation who has really only seen returns and views the stock market as a wealth builder (put money in, get more back), a young boomer investor who lost money saw the stock market as a scam (put money in, get less back). That was their first impression of the stock market. It is something that you should avoid. But as they got older, the system was about to force them into it.
Chapter 4, mandatory investing. Now, this is the last time I'm going to show you the old road map of retirement: work hard, get a pension, pay into social security, and retire at 65. By the late 70s, it was clear that that road map was falling apart. Pensions were on their way out. And a big reason was because of the Employee Retirement Income Security Act of 1974, which was meant to protect worker pensions, but also made pensions very expensive to maintain. So, companies started looking for a way out. And that way out arrived in 1978. Almost by accident, buried in the tax code was a small provision located in section 401 subsection K that allowed executives to defer taxes on bonuses. And in the early 1980s, a man named Ted Bennis spotted it and realized it could be used for everyone. Employees could contribute their own money, employers could match it, and the funds could grow tax-deferred until retirement. And at first, this was marketed as something on top of the pension. But very quickly, companies realized that it should be a replacement for it because it shifted the risk and responsibility of retirement from the employer to the employee. And by the mid-80s, the 401k was becoming the standard.
But like all new systems, at first it was very messy. Participation was low. Many workers didn't understand how it worked. Others cashed out their balances when they switched jobs or borrowed against it. And there was really no financial education, no YouTube, no index fund guides, just confusing brochures. And underlying it all was a deep skepticism. After all, this was the generation whose first impression of the stock market was 16 years of stagnation. To them, it looked less like a wealth builder and more like a scam. And now they were being told, "This is where you put your life savings." The cruel irony is the generation least likely to trust the stock market was the first generation forced to bet their retirement on it. The system changed, but boomers weren't ready for it.
And when we look back on the story, there are already three big lessons that we can learn.
Chapter 5, the three big mistakes. Up to this point in our story, boomers have already made three big mistakes that have set them back in retiring comfortably. And maybe by saying them out loud, we younger generations can learn from them. The first mistake was becoming an adult in the decade of stagnation. When boomers entered adulthood in the late 60s and early 70s, they entered one of the worst stretches of the stock market in modern history. I mean, from 1966 to 1982, the market went almost nowhere. And that first impression shaped how the entire generation viewed the stock market. It was a scam, which made them delay investing for a very long time.
The second mistake was believing the old system would work. Many boomers grew up watching their parents retire on pensions and social security. And to them, that was the road map they thought they'd follow. But as that system faded away and the new system appeared, they had no clue of what to do. And many took absolutely no action.
And probably the biggest mistake of them all is missing the early compounding years. In investing, the single most powerful ingredient isn't luck or skill, but it's timing. The earlier you start, the more time your money has to grow. And because of circumstance, one, boomers had 16 years of stagnation, so they missed out on that early growth. And two, because of that stagnation, many boomers didn't trust the market and delayed investing even further, losing even more time. For the first half of their adult lives, they were simply born at the wrong time.
But by the mid-80s, everything changed. The market finally woke up, and these boomers who were skeptical of the market for nearly 16 years were about to see the biggest bull run in history.
Chapter 6, from skeptics to believers. After nearly two decades of stagnation, the market entered its longest bull run in history. From 1982 to 2000, the Dow rose from 800 to 11,000, which is a big difference from the previous decade. And suddenly, the story flipped as the 80s went on. Boomers saw the market go up year after year after year. And what once looked like a scam now looked like a money-making machine. And by the late 80s, the 401k was finally mainstream. Companies offered matches, and workers began to view them as a promising path to retirement. And because of this bull run, investing became pop culture. CNBC launched in 1989. Magazines like Fortune and Money were weekly reads, and mutual funds poured billions of dollars into ads. And by the 90s, news outlets began celebrating a new success story: the 401k millionaire. These were workers who had maxed out their contributions from the beginning, rode the bull market, and ended up with seven figures in a single account. Proof, it seemed, the system worked.
For boomers now in their 40s and 50s, this is the moment they finally jumped into the market. However, the reality is, despite this growth, they were still at a huge disadvantage. In 1990, the oldest boomers were 44. And so they lost the benefits of early compounding. And on top of that, they were midlife, juggling kids, mortgages, and high expenses, making it nearly impossible to save aggressively to catch up. But to make up for lost time, many went heavy in risky, high-growth stocks to chase the boom. For the first time, boomers believed that they had cracked the code to retiring rich. But the cruel irony is, once this generation finally trusted the market, it's the same moment it was about to betray them.
Chapter 7, the one-two punch. By the year 2000, the stock market reached record highs. From 1990 to 2000, the Dow surged 285%, while the tech-heavy NASDAQ skyrocketed more than 1,000%. To many, it seemed like there was finally an equation to retiring rich: put your money in the stock market and watch it multiply. But there was one fatal flaw to this equation. Retirement was now entirely at the mercy of the market. And just as they finally believed the system, they were about to get hit by a one-two punch.
And the first blow occurred in 2000 with the dot-com crash. In the year 2000, the oldest boomers were 54, nearing retirement age, and confidently had their life savings in the market after tons of growth in the 90s. But a lot of that growth was built on hype. Anything with ".com" in its name attracted absurd amounts of money, even if it didn't have a profitable business model. For example, Pets.com spent millions on a Super Bowl ad, shipped 30 lb bags of dog food at a loss, and went bankrupt within 9 months. It was nonsense. But by March of 2000, reality finally caught up. The NASDAQ lost 78% of its value over the next two years, and the Dow fell by 38%. And for boomers in their 40s and 50s, that meant their 401ks were cut in half overnight. And this moment once again changed their view of the stock market. The belief that the market only went up disappeared.
And if that weren't enough, just as the market was getting ready to recover, they were hit by the second blow in 2008 with the Great Recession. In the year 2008, the oldest boomers were 62, at retirement age, and the market was at about the point it was in 2000. And they were hoping for another bull run like they saw in the 90s and they could retire comfortably. But they actually saw the opposite. The market collapsed, where the price of homes fell 27%. The stock market was cut in half, and unemployment spiked to 10%. And for these boomers who are entering retirement age, their 401ks were destroyed, and they realized that they had to keep working. And younger boomers, the youngest being 44, saw their 401ks crash and struggled to find work in what should have been their peak earning years. I mean, I was 15 when this happened. And this was the year that my dad lost his job. My mom's company was cut by 75%. My parents got divorced. They both cashed out their 401ks. One declared bankruptcy. And they both struggled for years that followed. These weren't just market corrections, but it was the one-two punch that destroyed many boomers' dreams of retiring.
Chapter 8, too little, too late. Coming out of the Great Recession, boomers were in their late 50s to 60s. Retirement was no longer far away, but it was now. And by 2010, it wasn't looking good for them. For the boomers with retirement accounts, the median balance was about $100,000, which only produces $333 a month in retirement. Although many were left with nothing due to losing it all in the two crashes. And at this point in life, it was too little too late to catch up. The compounding window had closed. They had high expenses. Their wages stagnated, and they faced job insecurity. And to cope with this, many are working past the age of 65, downsizing their homes, delaying social security, and working part-time jobs in retirement. However, in 2025, they're facing an even bigger problem.
Chapter 9, too old to work, too broke to retire. In 2025, boomers are between the ages of 61 and 79. So, they're all at retirement age. And sadly, many of them are at the point in their careers where nobody wants to hire them. They're too old to work, but too broke to retire. Many of them are being pushed out of career-level jobs, and because social security isn't enough to cover their expenses, they're being forced into low-wage work: Walmart greeters, Uber drivers, or other low-paying service jobs. As I said in the beginning of this video, since 1985, the share of Americans over 65 who are still working has doubled from 10.8% to 20.2%. It's a sad reality.
And so I want to finish this video off with Chapter 10.
Where do we go from here? All right, so we have covered a lot in this video. So let's take a step back. Boomers might be seen as the generation that had it all, but when you look at their complete story, you realize they weren't so lucky. They started their careers in a 16-year stagnated market, saw the old retirement road map disappear, were forced to put their faith in the market, had it knock them down back to back, and are now entering old age with nothing.
And so, the question is, what do we do with this information? Well, if there's just one lesson here, it's that financial stories are never simple. Boomers weren't just bad with money, but they were shaped by decades of policy shifts, corporate decisions, and economic crashes that no individual could fully control. And I never want to come across as an expert in any of the topics I talk about. I am simply a student presenting to the class what I have learned. And so I want to finish this video off with three takeaways that I learned from piecing this story together.
One, just because something works now doesn't mean it'll work in 25 years. Making this video really challenged my own views about retirement. We finance creators often preach that retirement is very simple: invest early on, your money will grow, and you'll retire rich. But the truth is, there are no guarantees. A lot can change in a very short amount of time, and what might work today might not work 25 years from now.
Two, the stock market isn't what we think it is. Another thing that this video challenged my view on is the stock market. In my own investment journey, I've really only seen the market go up, which has given me a very positive view. But this story showed me that I just started at the right time. I was just lucky. For the boomers, they weren't as lucky. The market stagnated for 16 years, and by the time they finally got in, it took it all away twice. And so, when is my luck going to run out?
And finally, be responsible, but don't wait until retirement to live your life. If there's just one more lesson from this boomer story, it is that waiting until 65 to live your life can be a very dangerous bet. Retirement systems change, markets crash, health fades, and time slips by faster than we expect. None of us can predict the future, and so build wisely, save consistently, but don't forget to enjoy the journey along the way because retirement isn't the destination of life. It's just one chapter.
Thank you so much for watching. If you enjoyed this video and appreciate the hard work I put into it, it would mean the world to me if you give it a like. Consider subscribing for more videos like it. I would love to hear your thoughts down in the comments section. And if you want to hear another very interesting story about why manufacturing is dead in America and it all went to China, give this video a watch next. And with that, go.