The New Demographics

Generational Views Of Retirement In The U.S.

Different generations face different retirement challenges

Excerpts from the recent National Institute On Retirement Security study, Generational Views Of Retirement In The United States, authored by Dan Doonan and Kelly Kenneally, uses the COVID pandemic as a springboard to examine the emerging retirement challenges for people of various generations. Access the full report here.

The ongoing COVID-19 pandemic has presented extraordinary health and economic challenges across the globe, triggering yet another deep economic crisis. While the availability of several vaccines in late 2020 has begun to alleviate health and economic issues, the economic fallout from the pandemic may create substantial uncertainty about financing retirement that could trigger Americans to work longer or rethink retirement. Even before the pandemic, many workers still were recovering financially from previous economic downturns.

A Changing U.S Retirement Landscape

Simultaneously, the past several decades have seen dramatic changes to the U.S. retirement system. A broad body of research finds that most Americans are not on track for a secure retirement. Different generations face distinct challenges when it comes to retirement. The Silent Generation had broad access to defined benefit pension plans, but faces growing health and long-term care expenses in retirement. Baby Boomers are transitioning into or approaching retirement and a large share are expected to face financial hardship in retirement.

Generation X was the first generation with 401(k)s as their primary retirement vehicle, and also face high expenses as the “sandwich generation.” And Millennials face a deeply troubling retirement outlook stemming from factors like depressed wages, high college debt, and the lack of participation in employer retirement plans. Further complicating retirement is growing financial asset inequality among Americans, with inequality growing across generations.

Against this backdrop, this issue brief examines national sentiment of various generations about retirement, each of which is face differing circumstances. This research finds that:

  • Millennials and Generation X are most concerned about the impacts of COVID-19 on their retirement. Across generations, most of those who are concerned about the impacts of the pandemic plan to delay their retirement.
  • There is generational agreement that the U.S. faces a retirement crisis, with Millennials and Generation X most pessimistic about retirement.
  • There is broad support across generations for Social Security, including support for increasing contributions and expanding benefits.
  • All generations have favorable views of defined benefit pensions, with Millennials holding the most favorable views. There is wide agreement generationally that pensions are better than 401(k) plans for providing retirement security, and that everyone should have a pension.

Through The Generations

Millennials and Generation X are most concerned about the impacts of COVID-19 on their retirement. Across generations, most of those who are concerned about the impacts of the pandemic plan to delay their retirement...

When looking across generations, the Silent Generation is likely the last generation to have broad access to defined benefit pension plans that typically provide stable and secure lifetime income. But this generation tends to be overly optimistic about their Social Security benefits and retirement savings, while underestimating growing post-retirement health and long-term care expenses.

Baby Boomers are transitioning into or approaching retirement. Combined with the impact of the 2008 financial crisis and COVID-19, many Boomers are expected to face financial hardship in retirement. Generation X was the first generation to mostly enter the workforce after the shift from pensions to 401(k)s in the private sector, facing the inefficiencies and struggles associated with do-it-yourself retirement plans.

While many Gen Xers are at the peak of their earning years, this “sandwich generation” is dealing with high expenses of college-aged children and supporting aging parents while trying to save for retirement. And Gen X has lived through multiple economic downturns, all of which impact employment and retirement readiness. Regarding Millennials, research finds a deeply troubling retirement outlook. A recent analysis found that most Millennials have nothing saved for retirement, and those who are saving aren’t saving nearly enough. Many factors are contributing to this generation’s retirement savings challenges – from depressed wages, high college debt, and the lack of eligibility to participate in employer retirement plans. More specifically, 66 percent of working Millennials had nothing saved for retirement.

Against this backdrop, this issue brief examines national sentiment of various generations toward retirement, each of which is face differing circumstances.

This research finds that:

  • Millennials and Generation X are most concerned about the impacts of COVID-19 on their retirement. Across generations, most of those who are concerned about the impacts of the pandemic plan to delay their retirement.
  • There is generational agreement that the U.S. faces a retirement crisis, with Millennials and Generation Xers most pessimistic about retirement.
  • There is broad support across generations for Social Security, including support for increasing contributions and expanding benefits.
  • All generations have favorable views of defined benefit pensions, with Millennials holding the most favorable views. There is wide agreement generationally that pensions are better than 401(k) plans for providing retirement security, and that everyone should have a pension.