It is astounding how many baby boomers and members of Generation X intend to work past age 70 or forever. Over one-third of Generation X and nearly half of the baby boomers anticipate working through age 70 or don’t plan on retiring, underlining the necessity for contingency planning if life’s unforeseen circumstances prevent them from reaching their retirement goals.
According to research conducted by Transamerica Center for Retirement Studies, along with the Transamerica Institute, 49% of baby boomers anticipate or have already prolonged their working life beyond the age of 70 or do not intend to retire. They are equally likely to blame their health (78%) or their financial situation (82%).
Baby boomers are extending their working years, which can assist in bridging financial gaps. According to Catherine Collinson, CEO of Transamerica Institute and TCRS, unexpected events can disrupt their best efforts. Collinson noted that most people retire earlier than anticipated, with the majority departing before age 65 owing to employment-related factors, personal health, or family health. Collinson stated this is why it is so crucial to have contingency plans.
Baby boomer employees (from 1946 to 1964), born when pensions were the norm, experienced a dramatic movement away from such retirement security nets over their lifetime. This change shifted the responsibility for retirement savings from the employer to the employee.
Collinson stated retirement is a bigger social issue, and the retirement landscape is changing quicker than people’s working careers.
In total household retirement accounts, baby boomers have saved an estimated median of $162,000 but only have $15,000 in emergency savings. According to the study, 40% of boomers intend to live primarily off Social Security, while 83% are still saving for retirement through a 401(k) or similar plan outside the job.
38% of Gen X (those born between 1965 and 1980) plan to retire at 70 or older or not retire at all, while 55% intend to continue working after retirement.
Most members of Generation X are saving for retirement, yet many may fall short. Collinson stated, With the oldest members of Generation X now in their late 50s and the youngest in their early 40s, there is no better time than now to build savings and make long-term financial strategies.
Savings-wise, Transamerica discovered that retirement preparation has increased with each generation. Baby boomers started saving at an average age of 35. The survey indicated that Generation X workers began saving at a median age of 30, Millennials at 25, and Generation Z at the unprecedentedly young age of 19.
Generation X saved a median of $87,000 in retirement accounts but only $5,000 in emergency funds. Only 22% of Gen X employees are “extremely” confident they will be able to retire with a good lifestyle, and only 28% are “very” confident they are saving enough for retirement. 78% are apprehensive that Social Security will not be available when they decide to retire. Similarly to baby boomers, most Gen Xers (81%) are saving for retirement through an employer-sponsored 401(k) or similar plan.
For millennials born between 1981 and 1996, the Great Recession began in late 2007 when they entered the workforce. They began their jobs with greater student loan debt than prior generations, and Millennials have delayed purchasing houses, marrying, and starting families.
Nonetheless, 76% of millennial workers participate in a 401(k) or equivalent retirement plan. The median yearly contribution to a 401(k) or similar plan is 15% of annual earnings. Millennial employees have accumulated a median of $50,000 in retirement accounts but only $3,000 in emergency reserves.
More frequently than baby boomers who are in or nearing retirement, millennials discuss retirement with family and friends, Collinson added.
Moreover, half of the millennials, 52%, anticipate that their primary source of retirement income will be self-funded savings. In comparison, 73% are anxious that Social Security will not be available when they retire.
Gen Z (born between 1997 and 2012) entered the workforce shortly before the COVID-19 epidemic when unemployment rates were at historic lows and have since recovered to lows. Collinson stated that despite this turbulent start to their careers, Generation Z would have greater access to 401(k)s and employer retirement plans than their predecessors.
52% of Gen Z employees have seen one or more negative consequences on their employment, ranging from layoffs and furloughs to decreases in hours and compensation, and 51% are struggling to make ends meet.
They have not, however, given up on retirement. 67% of Gen Z workers participate in 401(k)s or other employer-sponsored retirement plans, and those who do contribute an average of 20% of their yearly earnings.
Workers of Generation Z have accumulated a median of $33,000 in retirement accounts but only $2,000 in emergency reserves.
The good news is that they are saving, but the question is whether or not they are saving enough. Collinson stated. What will the future look like in 30, 40, or 50 years? It is anticipated that people will live longer lifetimes. How do you adequately fund that?
Many workers of all generations are at risk of not having a secure retirement. Because of the pandemic’s impact on workers’ jobs, money, and health, as well as the increased demand on social safety nets, the retirement risks workers confront are larger than ever, Collinson stated.