Is a retirement designed in the last century right for today’s retirees? The answer to the leading question is of course, no, but it’s exactly what the Baby Boomers are doing, the last generation to live a 20th-century retirement.
They stand in stark contrast to Generation X, Millennials and even Generation Z, according to the 2019 Wells Fargo Retirement study, which examines the attitudes and savings of working adults and retirees.
The survey found several key characteristics that influence today’s retiree, who—in this survey—is an average age of 70.
Most striking, more than eight in 10 retirees fund their retirement primarily with Social Security or a pension; just 5% say personal savings, such as an IRA or a 401(k), is their main source of funding.
By contrast, for younger generations, the quality of their retirement will depend almost entirely on how much they save through vehicles such as a 401k or IRA.
Indeed, 45% of Millennial workers say the top source of funding for their future retirement will come from an IRA or a 401k, compared to just 25% who say they expect to rely on Social Security or a pension for their retirement income.
| Primary Source for Paying Retirement Expenses |
Retiree | Baby Boomer | Generation X | Millennial | Generation Z
|
| 401k and or IRA | 5% | 22% | 41% | 45% | 44% |
| Social Security | 64% | 41% | 21% | 13% | 16% |
| Pension plan | 22% | 19% | 16% | 12% | 4% |
Two-Thirds with Student Loans Say Burden Impedes Retirement Saving
Despite recognition that saving and paying for retirement now rests with the individual, younger generations hold mixed views about whether they are saving enough.
Moreover, financial challenges negatively impact the ability of nearly half of workers to adequately save, the survey found.
Overall, just over half of workers say they are saving enough for retirement. By generation, 61% of baby boomers say they are saving enough, followed by Millennials (55%), Generation X (51%) and Generation Z (48%).
Debt plays a crucial role in workers’ ability to save, as 31% of Millennials say they have an “unmanageable amount of debt,” followed by Generation X (26%), Generation Z (25%) and baby boomers (14%).
Additionally, among all workers, nearly half (46%) say they are putting off saving for retirement due to current financial challenges, and 67% of workers paying student loans say the burden of student loans is getting in the way of saving for retirement.
As a result, many workers appear to be falling well short of what they will need to fund their retirement.
Twenty-nine percent have personally saved less than $25,000; 13% have saved between $25,000 and $100,000; and 11% have saved between $100,000 and $250,000—which means that more than half (54%) of workers have saved less than $250,000 for retirement.
Moreover, 32% of workers can’t estimate what they have saved for retirement—and only 15% of workers have saved $250,000 or more, according to the survey.
Looking at workers on a median basis (including those who have saved $0), baby boomers have saved $160,000; Generation X $66,000; Millennials $10,000; and Generation Z $2,000.
| Personal Savings Levels by Generation |
Retiree | Baby Boomer | Generation X | Millennial | Generation Z
|
| Less than $25K | 21% | 16% | 22% | 45% | 49% |
| $25K – <$100K | 10% | 11% | 14% | 14% | 8% |
| $100K – <$250K | 10% | 12% | 15% | 8% | 3% |
| $250K or more | 16% | 29% | 16% | 4% | 4% |
| Not Sure | 43% | 32% | 33% | 30% | 36% |
On the bright side, younger workers are starting to save much earlier than older generations of workers. Though baby boomers started saving around age 36 on average, Generation X started at age 31, Millennials at age 25 and Generation Z at 18, according to the survey.
Today’s retirees began saving for retirement at age 40 on average.
Social Insecurity
Fear that Social Security may not be available for retirement represents a concern across all working generations in the survey, with 71% indicating they are “afraid” it won’t be available when they retire.
Just over six in 10 workers (63%) say they would have no idea what they would do if Social Security were not available “when they need it,” a concern that jumps to 71% for current retirees.
Across generations, workers and retirees displayed strong emotions on the issue—as 91% of workers and 94% of retirees say they would feel “betrayed” if the money they paid into Social Security were not available when they retire. Moreover, the survey found that workers have much more faith in their personal savings than in Social Security. Only 55% of retirees have more faith in personal savings than in Social Security, which compares to 79% of workers.
At the same time, workers recognize that retirement is increasingly their own responsibility – but they believe that public policy can still play a role.
Ninety percent say that Congress needs to make it easier for workers to have access to tax-friendly retirement plans, and 79% say that companies should automatically enroll new employees in their employer-sponsored retirement plans.
Planning Mindset
Wells Fargo uncovered four specific statements that, when affirmed by workers, correlate with a significantly better financial life, including lower levels of financial stress and better financial well-being. These are:
- Setting and achieving a goal or set of goals during the past six months to support their financial life.
- Working diligently toward a long-term goal.
- Feeling better about having finances planned out over the next one to two years.
- Preferring to save for retirement now to ensure they have a better life in retirement.
Current workers with the planning mindset start saving at a younger age, save more each month for retirement and have saved more for retirement than workers without the planning mindset.
Moreover, workers with the planning mindset prioritize saving money for retirement after paying monthly financial expenses (71% versus 53% of those without the planning mindset), say they are in control of or happy about their financial life (82% versus 46%) and are confident they will have enough savings to live comfortably in their retirement years (80% versus 42%).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
