Skip to main content

You are here

Advertisement

Perspectives from 4 Generations of Workers Preparing for Retirement

Industry Trends and Research

Currently, there are four generations in the workforce, each bringing a diverse set of perspectives, skills and expertise, and based on their life stage, a diverse set of priorities and expectations for retirement.  

To get a better understanding of these various perspectives and priorities, the Transamerica Center for Retirement Studies (TCRS) conducted a deeper dive into the retirement prospects of Baby Boomers, Gen X, Millennials and Gen Z based on the findings from the organization’s annual retirement survey.  

According to Emerging From the COVID-19 Pandemic: Four Generations Prepare for Retirement, 76% of workers say their life priorities changed because of the pandemic and 56% cite saving for retirement as a financial priority. Many workers also expect to work beyond age 65 or do not plan to retire—and the majority plan to continue working at least part-time in retirement, a finding that is consistent with previous TCRS surveys. Most plan to do so for both healthy aging and financial-related reasons. Some workers indicate their expected retirement age has changed because of the pandemic.

But in comparing the four generations, the study also illustrates how workers’ expectations and preparations differ, and how the retirement landscape has evolved.  

“Today’s workers are emerging from a pandemic and navigating megatrends such as population aging, increases in longevity, workforce disruptors, and concerns about Social Security,” notes Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “Despite an unclear future, workers of all ages are envisioning and saving for an active and purposeful retirement—but are they adequately preparing?”    

Baby Boomers (Born 1946 to 1964)  

As many in the industry are aware, many Baby Boomers were already mid-career when the retirement landscape began shifting from defined benefit plans toward 401(k) or similar plans. They started saving at an older age than younger generations and have not enjoyed the same long-term time horizon to grow their investments. Emerging from the pandemic, Baby Boomers have been susceptible to employment risks, volatility in the financial markets, and increasing inflation—all of which could disrupt their retirement plans, TCRS notes.    

According to the research, 40% of Baby Boomer workers expect Social Security to be their primary source of retirement income. In addition, 83% are saving for retirement in an employer-sponsored 401(k) or similar plan and/or outside the workplace. They began saving at age 35 (median). Those participating in a 401(k) or similar plan contribute 10% (median) of their annual pay. Baby Boomer workers have saved $162,000 (estimated median) in total household retirement accounts but only $15,000 (median) in emergency savings.   

Almost half (49%) of Baby Boomer workers expect to or already are working past age 70 or do not plan to retire. Their reasons for doing so are almost as likely to be healthy aging-related (78%) as financial-related (82%). However, their success depends on support from employers, the study notes. Just 59% say their employers are age-friendly—for example, by offering opportunities, work arrangements, and training and tools needed for employees of all ages to be successful.  

Gen X (Born 1965 to 1980)  

Generation X began entering the workforce in the 1980s and 1990s when 401(k) plans were brand new and DB plans were starting to dissipate from the retirement landscape. They were early adopters of 401(k) plans and the first generation who could potentially have access to them for most of their careers. However, 401(k)s were still “relatively primitive” back in the 1980s and 1990s, with few investment options, limited investment education and guidance, and mailed quarterly statements, the report observes.

Consequently, only 22% of Gen X workers are “very” confident they will be able to fully retire with a comfortable lifestyle and just 28% “strongly agree” they are building a large enough retirement nest egg. Meanwhile, 78% are concerned that Social Security will not be there when they are ready to retire.   

In addition, 81% are saving for retirement in an employer-sponsored 401(k) or similar plan and/or outside the workplace. Gen X began saving at age 30 (median). Those participating in a 401(k) or similar plan contribute 10% (median) of their annual pay. They have saved $87,000 (estimated median) in total household retirement accounts but only $5,000 (median) in emergency savings.  

According to the research, many Gen X workers are seeking to extend their working years with more time to save. Thirty-eight percent expect to retire at age 70 or older or do not plan to retire, and 55% plan to work in retirement. TCRS further observes that they have an opportunity to set goals, as only 27% have a financial strategy for retirement in a written plan.   

Millennials (Born 1981 to 1996)  

Millennials entered the workforce around the Great Recession, experiencing a turbulent economy in their early working years. They started their careers with higher levels of student debt than previous generations, and have waited to buy homes, get married and start families. But with the increasingly widespread availability of 401(k) plans, they made a solid and early start in saving for retirement.  

Most Millennial workers (84%) say their life priorities have changed because of the pandemic and 68% are concerned about their mental health. Moreover, 34% were unemployed at some point during the pandemic for various reasons, while 60% cite paying off debt as a financial priority.   

Three in four Millennial workers (76%) are saving for retirement in a 401(k) or similar plan and/or outside the workplace. Unlike their older counterparts, they began saving at age 25 (median). Those participating in a 401(k) or similar plan contribute 15% (median) of their annual pay. Millennial workers have saved $50,000 (estimated median) in total household retirement accounts but just $3,000 (median) in emergency savings.  

In addition, 52% expect their primary source of retirement income to be self-funded savings, including 401(k)s, 403(b)s, and IRAs (40%) or other savings and investments (12%). Like Gen X, they also are concerned (73%) that Social Security will not be there when they retire.   

Gen Z (Born 1997 to 2012)  

Generation Z entered the workforce shortly before COVID-19 when unemployment rates were at historic lows, then skyrocketed at the onset of the pandemic, and have since returned to lows as workers have been reluctant to return to the workforce. Despite this tumultuous start to their careers, Gen Z will have even greater access to 401(k)s and workplace retirement plans than their predecessors, the study notes.    

The pandemic has been especially difficult for Gen Z workers, TCRS further notes. Nearly 6 in 10 (59%) workers often feel anxious and depressed, and 52% experienced one or more negative impacts on their employment. In addition, 51% have trouble making ends meet, yet they have not given up on retirement.  

Sixty-seven percent of Gen Z workers are saving through employer-sponsored 401(k)s or similar retirement plans and/or outside the workplace—and they started saving at the young age of 19 (median). Those participating in a 401(k) or similar plan contribute 20% (median) of their annual pay.  

Gen Z workers have saved $33,000 (estimated median) in total household retirement accounts but only $2,000 (median) in emergency savings. 

Retirement Priorities

TCRS further notes that workers across generations generally agree that they highly value retirement benefits. In fact, 89% of workers value a 401(k) or similar retirement plan as an important benefit. However, Gen X (92%) and Millennials (90%) are more likely to value retirement benefits, compared with Baby Boomers (84%) and Gen Z (82%).

What’s more, 8 in 10 workers (80%) agree that the next time they look for a job, all things being equal, the retirement benefits offered by the prospective employer will be a major factor in their final decision to accept an offer or not. Gen X (85%) and Millennial workers (83%) are more likely to agree that retirement benefits will be a major decision-making factor, compared with Gen Z (71%) and Baby Boomers (70%).

“As we look toward the future, a future in which all Americans can retire with dignity, policymakers must take center stage in orchestrating ways to strengthen the retirement system for current and future generations. Likewise, employers must continue to play a vital societal role by providing jobs, income, and benefits to help workers protect their health and finances and facilitate saving and investing for retirement. And the private sector must continue innovating products, services, and solutions that can help people live, work, save, and retire better,” Collinson stated.     

The findings in this report are based on the 22nd Annual Transamerica Retirement Survey conducted by The Harris Poll between Oct. 28 and Dec. 10, 2021, among a nationally representative sample of 5,493 workers in a for-profit company employing one or more employees.

 

Advertisement