Baby Boomers are exhibiting a stronger sense of financial preparedness and confidence, according to a recent study that explores generational perceptions of retirement readiness.
Allianz Life’s “Generations Ahead Study” of 3,000 Americans found that more than 7 in 10 Boomers (72%) said they feel financially prepared for retirement, an increase of almost 15 percentage points from 2010. The study polled 1,000 Baby Boomers (ages 52-70), 1,000 Gen Xers (ages 37-51) and 1,000 Millennials (ages 20-36).
Allianz suggests that a “new frugality has taken hold with Baby Boomers that is leading to a stronger sense of financial preparedness and confidence” than seen in previous studies, with 64% of Boomers seeing themselves as “savers” rather than “spenders.”
This new “frugal mindset” is also changing how Boomers think about saving for retirement, with nearly two-thirds (65%) saying they see it as a basic necessity like food or housing, versus 58% for Millennials and 53% for Generation X.
About a third (32%) of the Boomers polled expressed less uncertainty about their financial future than in 2010, when 50% said they were unsure about when, if ever, they could retire. The study also found that fewer Boomers today think it is “impossible” to determine retirement expenses (50%, down from 60% in 2014) and fewer believe they lack the tools to figure out the “retirement puzzle” (36%, down from 46% in 2014).
Boomers also have the highest median amount in retirement savings among all three generations at $175,000, and a full third of Boomers say they have $250,000 or more earmarked for life after work, according to the findings.
Focus on Millennials
Millennials are mirroring Boomers in feeling prepared for retirement (74% of Millennials, 72% of Boomers) and having confidence that their income will last a lifetime (76% of Millennials, 67% of Boomers), according to the study, while Gen Xers apparently are feeling more vulnerable (63% of Gen Xers, 58% of Boomers).
The Millennials and Gen Xers in the poll have the same overall median retirement savings level of only $35,000, despite Gen Xers being much closer to retirement.
Millennials do, however, have their own unique challenges. While Millennials may seem better positioned for retirement than their closest predecessors, they like to spend. The findings show that the majority of Millennial respondents (63%) claim to be “spenders” and nearly one in five (17%) admit they spend money “as soon as I get it” (versus only 6% of Boomers). Half of all Millennials report that they spend more on going out than they do on rent or mortgage (versus 16% of Boomers).
Despite these financial challenges, Millennials apparently have a desire to avoid “repeating their parents’ mistakes” with saving for retirement and are open to new savings strategies.
Compared to Boomers, Millennials have embraced online apps to help manage money and/or track spending (70% versus 24% of Boomers). And beyond technology, more Millennials are comfortable using traditional money management methods like a notebook or planner to manage expenses (63% versus 28% of Boomers). Millennials are also more than twice as likely as Boomers to set up so-called “tricks,” such as different accounts for different goals, to get themselves to save money (71% versus 32% of Boomers).
According to Allianz, the end result is that Millennials have the most confidence of any generation that they’ll be able to fund their life goals (78% versus 67% Boomers and 64% Gen X), with a quarter even feeling “extremely confident” they’ll be successful.
“Although generations share similar hopes and fears for the future, the fact that they all approach retirement in different ways is testament to the need for more tailored planning that can address both the positives and negatives inherent in each group,” concludes Paul Kelash, Vice President of Consumer Insights for Allianz Life.
Allianz’s study was conducted by Larson Research + Strategy via online survey in May 2017 with 3,006 U.S. adults ages 20-70 with a minimum household income of $30,000 or more.