Americans across generations struggle to achieve retirement security. While many members of previous generations entered retirement with stronger retirement plans, less debt, and lower costs, many members of younger generations face significant challenges. Understanding the different challenges facing each generation is key to designing policies and solutions that ensure retirement security for all Americans
Many Baby Boomers and members of the Silent Generation entered retirement on more solid financial footing because more of them had traditional pensions. These defined benefit plans provided predictable, lifetime income and served as a reliable supplement to Social Security and individuals savings. Pensions gave previous generations:
- Guaranteed monthly income for life
- Protection against market volatility
- A stronger foundation for financial stability in retirement
The reliable income from pensions combined with carrying less debt into retirement, such as housing or student loan debt, and generally lower costs than faced by workers and retirees today meant that older Americans could be more confident entering retirement. But as pensions have declined dramatically in the private sector, younger generations face a very different landscape.
Generation X, those born between 1965 and 1980, is fast approaching retirement age, and it is the first generation to do so following the shift to 401(k) plans. NIRS research, The Forgotten Generation: Generation X Approaches Retirement, highlights troubling realities:
- The median retirement savings for a typical Gen X household is just $40,000.
- Many households have only a few thousand dollars—or nothing at all—saved.
- Even higher earners are struggling to save adequately, with just under $72,000 saved for the median Gen Xer in the top quartile.
- Only 14% of Gen Xers have a traditional pension.
With limited time left to save, Gen X faces daunting challenges. They carry significant responsibility for managing their retirement outcomes through 401(k)-style plans and personal savings, but the savings shortfall puts many at risk of financial insecurity in old age.
Millennials (born 1981–1996) started slowly on the path to retirement security with many looking for their first job during a weak job market. As a result, many Millennials faced barriers to saving for retirement, such as lack of access to a plan, eligibility barriers, or low incomes. As the job market has strengthened in recent years and Millennials are beginning to enter middle age, there is evidence that they are saving more for retirement than previous generations, but 76% of wealth was held by the top quarter of Millennial households in 2019. Some of this progress is likely due to the ongoing development of the 401(k) system, with more automatic features in place as Millennials began participating in plans. Some of Millennials’ higher level of savings is also likely a result of them seeing their parents and older relatives struggle to retire securely with inadequate savings. Time will tell if Millennials end up surpassing Generation X in retirement preparedness despite their late start.
When discussing generational differences in working and saving, it is often said that young people today change jobs more frequently than those of previous generations. However, this claim is not supported by the data. Millennials and members of Generation Z have median tenure at their job that is nearly exactly the same as Generation X, as depicted in the chart below. When the Bureau of Labor Statistics examined the work history of Baby Boomers, they found that while Baby Boomers held an average of 12 jobs over the course of their working lives, half of those jobs were held between the ages of 18 and 24, suggesting that they changed jobs when they were young just as often as members of younger generations today do.
