Maybe they Aren't Lazy And Entitled — Millennials And Gen Xers Ahead Of Boomers With Retirement Planning

Millennials and Gen Xers are better prepared for retirement than baby boomers, according to a study from The Vanguard Group Inc.

Millennials and Gen Xers will enjoy a higher income replacement rate in retirement than baby boomers, across all income levels, the study found. This means they can maintain a more comfortable standard of living after they leave the workforce that aligns closer to their preretirement standard.

Millennials and Gen Xers report greater awareness of the importance of saving: Millennials witnessed the struggles of their parents and grandparents who entered retirement financially unprepared. This fueled a greater focus on long-term financial planning among younger generations who are less likely to rely on pensions in retirement.

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Many millennials entered the workforce when automatic enrollment in 401(k) plans became the norm. This made saving for retirement easier and more automatic. Another Vanguard study regarding 401(k) enrollment statistics found companies offering only voluntary enrollment saw a meager 28% of new hires participate, compared to 91% with automatic enrollment.

Working Longer And Facing Challenges

Millennials and Gen Xers should live and work longer than previous generations, allowing them to accumulate more wealth and contribute to their retirement accounts for longer.

Despite these positive trends, it’s important to note that millennials and Gen Xers still face significant challenges. Student loan debt remains a major burden for many. After a multiyear pause, federal student loan payments resumed in September, impacting Gen Xers and millennials’ ability to push more money into retirement accounts.

Other impacts include the spread of the gig economy that does not provide workers with retirement plans or pensions and the rise of artificial intelligence (AI), which will disrupt multiple job functions. The rising cost of healthcare could significantly impact their retirement savings.

The Vanguard study found all age groups will not replace a sufficient amount of income in retirement. It estimated all groups would need to replicate 83% of their preretirement income, yet found millennials ages 37 to 41, are on track to replace 50%, and boomers ages 61 to 65 are only going to generate 50%.

Millennials and Gen Xers hoping to maximize their earning and saving power can take several steps:

Start saving early and consistently: The power of compound interest is significant. Even small contributions made early can grow into a substantial sum over time.
Take advantage of employer-sponsored retirement plans: These plans offer significant tax benefits and often include employer-matching contributions, which provide the employee with an instant high return.
These generations should diversify investments to minimize risk and adjust their assets as they age to protect wealth.
A qualified financial adviser can help people create personalized retirement plans and make informed investment decisions throughout different life stages.

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