2 Retirement Savings Tips Boomers and Gen X Should Learn From Millennials
Written by
Adam Palasciano
Edited by
Daria Uhlig
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Your retirement should be a relaxing and enjoyable stage of life, not one characterized by financial struggle. But for some generations, this could be the case — specifically, boomers and Gen X.
A new report from Morningstar revealed that the younger generations might be in better financial shape heading toward their golden years. In its Model of U.S. Retirement Outcomes, a report that analyzes whether different generations in the U.S. will have sufficient funds to retire, Morningstar found that:
- Forty-five percent of American households are projected to run out of money in retirement.
- Only 37% of Gen Z and 44% of millennials had retirement-fund shortfalls compared with 47% of Gen X and 52% of baby boomers.
If you’re a Gen Xer or baby boomer and you feel that you’re not on track for retirement, it’s not too late. These tips from Goldman Sachs’ Retirement Survey and Insights Report will help you follow the younger generations’ lead:
Start Saving Money in a 401(k) or IRA Immediately
Contributing money to a 401(k) or individual retirement account as early and as often as possible is crucial. Consider setting up automatic deposits and investments from your biweekly paycheck. This way, your money will start working for you without you lifting a finger. Some employers offer a dollar-for-dollar percentage match on your contributions, so it’s smart to contribute at least enough to get the full match. As a general rule, saving at least 15% of your income toward retirement is key.
As per the IRS, the 401(k) contribution limit for tax-year 2024 is $23,000, while the maximum IRA contribution is $7,000. If you’re age 50 or older, you can make additional, catch-up contributions of $7,500 to 401(k)s and $1,000 to IRAs.
Build an Emergency Savings Fund
If you don’t have one already, prioritize building an emergency savings fund as soon as possible. Emergency savings can keep you from having to go into debt or tap into your retirement accounts early to get through a financial emergency.
Start by saving at least $1,000 right away and then work towards building your savings from there. It’s a smart idea to set automatic deposits from your checking to your savings account that align with your payday so your savings will grow on autopilot. Be sure to park your liquid cash in a high-yield savings account to earn maximum interest.
Why Are Gen Z and Millennials Better Prepared for Retirement?
One key reason older generations are behind is that Gen Xers and baby boomers were at the front of a shift away from company-provided pensions. This has resulted in Gen X and baby boomers having less time to grow sufficient, self-funded retirement accounts like their younger counterparts.
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