5 Biggest Financial Lessons From Baby Boomers

Most baby boomers — those born between 1946 and 1964 — are now in retirement. While many have enjoyed successful careers and comfortable lifestyles, others find themselves in a less-than-ideal financial situation. A common regret among this generation is not saving more for their golden years. 

According to Bankrate’s 2024 Financial Regrets survey, 37 percent of baby boomers (ages 60-78) say their biggest financial regret is not saving enough for retirement. Of participants in the survey, it was the most commonly cited regret by far. 

By examining the financial regrets and successes of baby boomers, younger generations can learn from their good habits — and steer clear of their bad ones. 

5 biggest financial lessons from baby boomers

Here are the five biggest lessons younger generations can learn from baby boomers — and how to implement these good habits into your own life. 

1. Start saving early

If boomers could go back and do one thing differently, many would start saving for retirement earlier. 

Saving for retirement might not be top of mind when you’re just starting out in your career, but thanks to the power of compound interest, it pays to start early. Every dollar you save today has the potential to grow exponentially over time.

A simple compound interest calculator reveals how small but consistent contributions magnify over the years. 

Imagine you start saving when you’re 25 years old. You make an initial $1,000 deposit, and contribution $100 a month for 10 years. You’re earning a 3 percent return in your high-yield savings account that compounds monthly. 

In 10 years, you’ll have saved $15,323! Not bad for $100 a month. Now imagine you stretched that timeline to 40 years. When you’re 65, you’ll have $95,921 saved — and only have contributed $49,000. 

Now imagine your friend, Mark, starts saving 10 years after you, when he’s 35. He makes the same $1,000 deposit and contributes $100 a month, earning 3 percent interest compounded monthly. 

In 30 years, when he’s also 65, he’ll have just $60,730 — less than two-thirds of what you’ve saved — and have contributed $37,000. 

That’s the power of compound interest and consistent saving. 

2. Invest in stocks, mutual funds and ETFs

While saving money is great, investing your cash in assets such as stocks, mutual funds and ETFs is a tried-and-true way to build wealth for retirement. About two-thirds (63 percent) of U.S. adults age 65 and older owned equity through individual stocks, mutual funds or retirement savings accounts, according to an April 2023 survey by Gallup. 

While short-term stock fluctuations are common, stocks have the potential to generate substantial returns over the long run. The S&P 500, a widely tracked index, has historically delivered an average annual return of about 10 percent. Compare that to even the best high-yield savings accounts, which fetched a return of about 5 percent in November 2024. 

Successful investing isn’t a one-time event. Regular contributions to your investments, known as dollar-cost averaging, can help reduce market timing risk. By spreading out your purchases, you’re less likely to buy at peak prices, allowing your wealth to grow over time.

Plus, investing is easier and more accessible for younger generations than it was for baby boomers. Here are some simple steps you can take to start growing your portfolio.

• Start with your employer’s retirement plan: If you have access to a 401(k) or similar retirement plan at work, investing is as easy as filling out a couple forms, picking your funds and putting your contributions on auto-pilot. Aim to contribute at least enough to get the employer match, if your company offers one — it’s essentially free money. 
• Open an IRA: If your employer doesn’t offer a 401(k), you can open an IRA on your own through an online brokerage company like Fidelity or Charles Schwab. These accounts don’t charge annual fees, and like a 401(k), offer great tax benefits. 
• Start with ETFs and index funds: These investments give you ownership in a diversified basket of stocks and/or bonds, which can reduce risk and offer steady growth over time.

How an advisor can help

Need expert guidance when it comes to planning for retirement or managing your investments? Bankrate’s AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals.

3. Live within your means

Boomers grew up during some prosperous times, and many enjoyed strong salaries and career stability — but overspending can catch up with anyone. It’s easy to let lifestyle creep set in, where each raise goes to nicer cars, bigger houses and fancier vacations instead of your bank account. 

Learning how to live below your means today can help you save more money for tomorrow. The first step is getting a handle on where your money is going. 

To effectively manage your finances, consider the 50/30/20 rule. This approach suggests allocating 50 percent of your after-tax income to needs, 30 percent to wants and 20 percent to savings or debt. Budgeting apps can help you track your spending, identify areas to cut and stay on track with your financial goals.

Here are other tips to help you live within your means.

• Set no-spend days or weekends: Pick one day a week or one weekend a month to avoid spending any money beyond absolute essentials. This small change can keep you on track and make spending feel more intentional.
• Cancel unused subscriptions: Do a monthly audit of your subscriptions — streaming services, news apps, old gym memberships, etc. Canceling even a couple can add up to noticeable monthly savings.
• Eat at home: Restaurant and takeout costs can add up fast. Older generations saved a lot of money by eating at home, and so can you. Set a weekly cooking schedule to avoid the temptation to eat out, and consider prepping ingredients on your day off to make cooking easier throughout the week.
• Use cash for discretionary spending: For “fun” expenses, consider using cash instead of your card. It gives you a set budget for the month, and physically handing over cash can make you think twice before making a purchase.

4. Pay off debt

Since the 1990s, older Americans have increasingly carried debt, according to 2023 research from the Center for Retirement Research at Boston College. While mortgage debt accounts for a large portion of this increase, other forms of non-secured debt — such as student loans, medical debt and credit cards — have also risen among older adults. This trend is especially concerning for financially vulnerable households. 

And when it comes to financial regrets, 13 percent of baby boomers say they regret taking on too much credit card debt, according to Bankrate’s Financial Regrets survey. Credit card debt was the second most commonly cited regret by boomers behind not saving earlier for retirement. 

Eliminating high-interest debt before retirement can put more wiggle room in your budget, especially when you’re on a fixed income. Here are some things you can do to pay off credit card debt.

• Use the debt snowball or avalanche method: The snowball method starts by paying off small balances first, while the avalanche method tackles high-interest debts first. Pick the debt payoff strategy that works for you to build momentum and save on interest.
• Round-up payments: Instead of paying only the minimum on your credit cards, round up your payments, for example from $80 to $100. Even a small additional amount each month can make a big difference over time.
• Make biweekly payments: Instead of one monthly payment, make a half-payment every two weeks. This will result in one extra full payment each year, reducing your balance faster and saving on interest.
• Work with a nonprofit credit counseling agency: If you feel overwhelmed, a credit counselor can help you develop a plan, consolidate debts and potentially negotiate lower interest rates with your creditors. Look for a nonprofit agency for trustworthy, low-cost help.

5. Take your health seriously — it’s expensive

Health care costs have hit many baby boomers hard, especially as they’ve gotten older. Many learned (sometimes too late) that skipping routine care and insurance and not planning for long-term care can be costly mistakes. Fidelity estimates that a 65-year-old retiring in 2024 will spend an average of $165,000 on health care costs in retirement. 

While Medicare, the federal health insurance program for people 65 and older, covers many of your health care costs in retirement, it doesn’t cover everything. It isn’t free either. So planning ahead for medical expenses now can protect your nest egg down the road. 

Here are a few things you can do to prepare for medical costs in retirement.

• Contribute to an HSA: If you have a high-deductible health plan, consider contributing extra money to your health savings account (HSA). Contributions are tax-deductible, and they grow tax-free, giving you a leg up on future health costs. Plus you can withdraw money tax-free for any reason after age 65 — right when you’re likely to need that money most. 
• Invest in your HSA: Once you’ve built up a few thousand dollars for immediate health needs, consider investing a portion of your HSA funds — some HSAs offer investment options such as ETFs and mutual funds.
• Look into long-term care insurance: Long-term care insurance can help cover the high costs of assisted living and nursing home expenses. Premiums tend to be lower if you buy a policy in your 40s, so it’s smart to consider it earlier rather than later.
• Keep up with preventive care: Maintaining good physical health now can help lower your risk of chronic conditions later. Regular check-ups, exercise and a balanced diet are long-term investments in lower health care costs. 

Bottom line

Baby boomers’ biggest financial regrets offer valuable lessons for younger generations. By saving early, investing wisely and living within your means, you can build a strong financial foundation and enjoy a fulfilling retirement.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.