Millennials Set To Enjoy a Cozier Retirement Than Late Boomers
Written by
Melanie Grafil, AI Editor
Edited by
Melanie Grafil
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There’s been much talk about how hard it might be to retire comfortably these days. But, there’s some good news for older millennials in the latest report from Vanguard Retirement Readiness. Millennials may have a bit of an easier time when they retire compared to late baby boomers. The report shows older millennials might keep about 66% of their income when they retire. That’s better than Gen X and late boomers, who might only keep 53% and 51% of their income.
See Also: 3 Ways To Recession-Proof Your Retirement
Millennials vs. Boomers in Retirement
To put it in simple terms: perhaps you might think of retirement as a long vacation. Just like you’d need money to enjoy a vacation, you need a certain amount to enjoy retirement. Experts often say people need around 68% of their working income to retire comfortably. Older millennials are pretty close to this mark. Gen X and late boomers, not so much.
The idea is to have enough cash to cover your needs without working. That includes your bills, groceries, health care, and even to fund your hobbies. If you only have half of what you used to make, you’d be going on that vacation, but not be able to do much because you’re short on money. And who wants a vacation like that?
Moreover, hitting these targets is about peace of mind. Knowing you have enough means you won’t have to worry about money and can really enjoy your retirement. It’s about having the freedom to live your life on your terms, even when you’re not working.
How Did Millennials Get Ahead?
A few reasons. Millennials have had better access to info and tools that make saving easier–for example, using budgeting apps and banking online. Plus, many started working right after the big economic crash in 2008, learning early to be careful with their money.
Also, retirement plans have changed. Millennials often use plans where they can choose how much to save and where to invest it. They’ve had more flexible retirement saving options, like 401(k)s, which let them play a more active role in growing their retirement pot. Late boomers didn’t always have these options.
Even with this positive outlook, the report reminds everyone to keep planning and learning about retirement. It’s not just about hitting a number. It’s knowing how much you’ll need and making a plan to get there.
Challenges Ahead for Gen X and Late Boomers
For Gen X and late baby boomers, the Vanguard report serves as an important alert. It’s clear that these generations may have to revisit and possibly revamp their approaches to retirement planning. The findings suggest that merely following old strategies might not suffice. Increasing savings rates or recalibrating expectations for retirement life could become essential steps.
The economic environment has changed dramatically over the past few decades. The shift from employer-sponsored pension plans to individual retirement accounts, like 401(k)s, has placed more responsibility on individuals to save for their own retirement. Gen X and late boomers, caught in this transition, may not have been fully prepared for the implications it had on their retirement savings.
Moreover, these generations have faced their own unique challenges. Gen X, often referred to as the “sandwich generation,” is caught between supporting aging parents and raising their own children. This has potentially diverted funds that could have been saved for retirement. Late baby boomers, on the other hand, experienced significant financial setbacks from the Great Recession of 2008, just as many were entering their peak earning years. The recovery period may not have been sufficient for some to rebuild their retirement savings fully.
Gen X and late boomers might need to revisit their current savings and projected retirement income. It may require making tough decisions, like working longer than anticipated or adjusting lifestyle expectations for retirement. Additionally, exploring ways to maximize savings, such as taking advantage of catch-up contributions to retirement accounts, could prove beneficial.
A Call to Action
The Vanguard report shows different generations are facing different challenges when it comes to retirement. Older millennials are on a good path thanks to smart decisions early on. But they can’t just sit back and relax. The world of finance is always changing, and staying on top means staying informed and ready to adapt.
For Gen X and late boomers, now’s the time to take a hard look at retirement plans. The goal is clear: find a way to retire securely and happily.
Final Take
Vanguard’s report highlights a shift in how different generations are preparing for retirement. While older millennials look to be in a good spot, Gen X and late boomers could have some work to do.
Looking ahead, it’s never a bad idea to focus on planning for retirement, no matter what your age is. This means understanding the latest in financial education, making the most of new tools and being ready to change plans as needed. The aim? To retire not just comfortably, but with confidence and peace of mind.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
