3 Generations Face the Retirement Crisis in America

Clockwork Orange scene

Retirement can be scary for every generation | Source: Warner Bros.

The retirement crisis in America is not contained to any one generation. Across the country, people of all ages are struggling with stagnant wages, rising living expenses, and an overall sluggish economy. Some are closer to their golden years than others, but one thing is clear: There are three unique generations with very different retirements ahead of them.

While retirement is on people’s minds, many workers are still trying to recover from the financial meltdown of yesteryear. According to the 17th Annual Transamerica Retirement Survey, one of the largest and longest-running national surveys of its kind, 61% of workers say they have not fully recovered from the Great Recession. Included in that figure are 41% who have “somewhat recovered,” 13% who have “not yet begun to recover,” and 7% who believe they “may never recover.” Only 20% say they have fully recovered.

“Although the Great Recession ended years ago, millions of Americans are still regaining their financial footing,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies, in a press release. “As each year passes, people’s fears about our current retirement system come more sharply into focus. Amid retirement savings shortfalls, American workers are attempting to prop up our system’s three-legged stool by adding a fourth leg: working during retirement.”

Not your parents’ retirement

Each generation receives its fair share of retirement worries, but the majority of millennials, Generation X, and baby boomers all say they’ll have a much harder time achieving financial security than their parents. Although, some generations are more upbeat and better prepared for their golden years than others.

Let’s take a look at the current state of retirement affairs for the three major generations.

Baby boomers, born 1946-1964

baby boomer retirement statistics

baby boomer retirement statistics | Source: TCRS

Baby boomers are the most pessimistic generation when it comes to retirement lifestyle. Nearly half (45%) of baby boomers expect their standard of living to decrease in retirement, compared to 41% of Generation X and only 36% of millennials. A meager 7% of baby boomers expect their standard of living to increase during retirement. Baby boomers are the most likely to say they are afraid of outliving their savings and investments, health issues that lead to long-term care, and overall affordable healthcare. Just over half of baby boomers expect to retire after age 65.

“Working longer and fully retiring at an older age is a common sense solution for mitigating retirement savings shortfalls. Baby Boomers’ vision can only be achieved if they are proactive about staying employable and if employment opportunities are available to them,” explains Collinson. “As part of their retirement planning, Baby Boomers should create a Plan B if retirement happens unexpectedly due to job loss, health issues, or other intervening circumstances.”

On the positive, 67% of baby boomers say they are staying healthy so they can continue working, while 56% and 40% are performing well at their current jobs and keeping job skills up to date, respectively. Seventy-three percent “strongly agree” or “somewhat agree” that their current employer is supportive of its employees working past age 65.

Generation X, born 1965-1978

Gen X retirement statistics

Gen X retirement statistics | Source: TCRS

Generation X is made up of 401(k) guinea pigs, as it’s the first generation to have access to 401(k) retirement plans for most of their working careers. Seventy-seven percent of Generation X workers are saving for retirement and they started saving at a median age of 28. Yet, 401(k) plans have also served as emergency funds. Nearly a third have taken a loan or early withdrawal from their 401(k) plans. This is not too surprising considering Generation X workers have only saved $5,000 (estimated median) for unexpected financial setbacks.

“Generation X has entered its sandwich years with many in the middle of raising children and looking after aging parents – while juggling their jobs. They may feel that they cannot afford to invest in their own retirement. On the contrary, they have now reached the age at which they cannot afford not to save for retirement,” says Collinson. “Generation X has fallen behind on their retirement savings, but they still have time to catch up and improve their retirement outlook if they begin focusing on it right now.”

In regard to retirement optimism, Generation X typically finds itself somewhere between millennials and baby boomers. Forty-one percent of Generation X workers expect to retire after age 65, with 14% expecting to work full-time in “retirement.” Generation X is the most likely generation to say they’ll keep working because they haven’t saved enough or can’t afford to retire.

Millennials, born 1979-2000

millennial retirement statistics

millennial retirement statistics | Source: TCRS

Millennials are perhaps the most misunderstood generation. They may appear to be blowing all their money on iPhones and Starbucks, but seeing their parents struggle and hearing time after time to save more money is apparently getting the message across. Seventy-two percent of millennial workers are saving for retirement and they started saving at a median age of 22. In fact, 30% contribute more than 10% of their annual pay.

Over half of millennials expect their primary source of retirement income to be self-funded, but are the most confident generation when it comes to retiring with a comfortable lifestyle. Thirty-five percent believe they’ll retire before age 65, nearly twice the amount of Generation X (18%) or baby boomers (19%). Millennials are the most likely to say they want to travel, spend time with friends and family, and pursue hobbies in retirement.

Of course, it’s not all rainbow and butterflies. Millennials may not be making the best investment moves. Seventy-two percent agree they do not know as much as they should about retirement investing, while one in four are “not sure” how their retirement savings are invested. However, millennials are the most likely to find digital technologies offered by their retirement plan providers as helpful.

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