New research on baby boomers, Generation X and millenials recently released by the Transamerica Center for Retirement Studies (TCRS) indicates that attitudes towards retirement and trends in retirement are rapidly changing between the three groups.
“Experts have long written about the changing retirement landscape over the past century,” TCRS President Catherine Collinson said. “Times are changing so rapidly that the retirements of baby boomers, Generation X and millenials will not only be a radical departure from their parents’ generations but from each other as well.”
According to the research, baby boomers—those born between 1946 and 1964—were mid-career when retirement plans like the 401(k) started to gain popularity, and they did not have a full 40-year investment to receive the benefits of the plan.
The shortfall in savings may, according to the data, help explain a steep increase in the number of baby boomers who rely on Social Security benefits as their primary form of income—36 percent, compared to 26 percent in 2007.
The study also noted that while many baby boomers expected to shift from full-time to part-time in their retirement transition, fewer than one in four employers had such a program in place for employees.
While baby boomers have not been able to take full advantage of the 401(k) plan, Gen Xers—born between 1965 and 1978—are the first to have access to the plan for most of their careers.
Approximately 90 percent said retirement plans like the 401(k), 403(b) or IRA are important benefits, and more than 50 percent of Gen Xers plan to fund their retirement through retirement plans.
According to the research, however, Gen Xers have taken advantage of plan features like loans and early withdrawals that are now seen by some as non-conducive to growing retirement savings. Approximately one in four current 401(k) participants have taken out a loan or early withdrawal.
“Generation X will begin turning 50 next year, a loud wakeup call for them to get laser-focused on planning, saving and investing for retirement,” Collinson said. “Their clock is ticking but they still have time to substantially improve their retirement prospects.”
Both baby boomers and Generation X have, according to the research, had difficulty saving for retirement, but millenials may have learned from previous generations in prioritizing retirement savings.
The survey showed 70 percent of millenials are saving for retirement, and a majority plan to retire before or at age 65.
Two in three millenials plan to fund retirement through retirement plans, and among millenials offered a 401(k) or similar plan, 71 percent participate in the plan. The study also found that the salary contribution rate increases to a median of 10 percent for millenials whose employers match plan contributions.
“Millenials are a digital, do-it-yourself generation of super savers,” Collinson said. “They’ve heard and responded to the message they need to start early and save as much as possible.”