Key Takeaways
- Boomers struggled with the shift from pensions to 401(k)s, impacting their retirement savings.
- The Great Recession forced many boomers to use savings early, hurting long-term growth.
- Millennials benefit from earlier financial education and automatic retirement plan enrollment.
- Boomers have less time to save for retirement compared to millennials.
- Only 20% of boomers feel “very confident” in their retirement goals versus 43% of millennials.
Baby boomers are worse off for retirement than younger generations thanks to changes in retirement savings options that have impacted their financial preparedness. Pensions have shifted to 401(k)s and boomers dealt with the impact of the Great Recession.
According to a 2024 national Transamerica survey, Boomers have a median of $194,000 in all household retirement accounts, while millennials have already saved $50,000. When considering the roughly 30-year age difference, millennials are way ahead of their older counterparts.
Everyone’s lifestyle is different, making it tough to put a single number on how much you need for retirement. One guideline from Fidelity says that you should aim to save at least 1x your salary by 30: 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Saving for retirement is essential to building financial security when you stop working. So, what’s holding boomers back?
How Boomers and Millennials Differ on Retirement Savings
Benchmarks aside, the reality of retirement savings reveals stark contrasts across generations, particularly between baby boomers (born 1946-1964) and millennials (born 1981-1996). Contrary to what you might expect, the younger millennial generation appears better positioned for retirement than most baby boomers.
Surveys have shown that:
- 43% of millennials say they’re “very confident” they’ll be able to meet retirement goals, compared to around 20% of baby boomers.
- 27% of those 59 and older do not have retirement savings.
- 56% of pre-retired boomers plan to work past the age of 70, while 61% of millennials plan to retire at 65 or younger.
- The Center for Retirement & Policy Studies predicts that 52% of boomers are likely to run short on money in retirement, compared with 44% of millennials.
Each generation faces unique challenges and opportunities when it comes to securing a comfortable retirement. For the baby boomer age group, a few contributing factors stand out:
Reason 1: The Shift from Pensions to 401(k)s Affected Boomer Savings
Boomers joined the workforce in the late ’60s to the early ’80s, at which point company pensions (or defined benefit plans) started giving way to 401(k)s. For the first time, employees became responsible for funding their own retirement through salary deductions. With little education or guidance, many boomers were unprepared and missed out on key savings during the early years of 401(k)s.
Reason 2: The Great Recession’s Long-Lasting Impact
The 2008 financial crisis was another unlucky break that hit baby boomers particularly hard. It happened during this generation’s peak earning years, just as many of their children headed off to expensive colleges. The sudden economic downturn had many boomers tapping into their savings early, which stunted long-term growth. As a result, the share of working-age families with retirement account savings rose in the 1990s but contracted by more than 5% following the 2007–2009 recession.
Reason 3: Less Time to Save for Retirement
By 2030, all boomers will be age 65 or older. For most, retirement is right around the corner or has already begun. Since the 2010 census, about 10,000 people per day are crossing the traditional retirement age threshold.
Whereas millennials have time on their side, a baby boomer who is behind on savings has much less time (if any) to catch up. For example, a 34-year-old millennial (born in 1990) still has approximately thirty years to take advantage of compound interest.
Reason 4: The Role of Financial Literacy in Shaping Retirement Out
Baby boomers grew up in a time when discussing money was off-limits, and retirement planning was shrouded in mystery. Parents rarely discussed salaries or saving habits at home, and financial education was virtually absent from schools and society.
Millennials, however, grew up with parents who were more open about money matters and learned financial concepts at a younger age. They absorbed financial education from social media and the internet. With the advent of apps and online tools, saving has become simpler and also more seamlessly integrated into our daily lives.
Reason 5: Auto-Enrollment Benefits Influence Millennials’ Retirement Savings
Thanks to the SECURE 2.0 Act, all 401(k) and 403(b) plans established after December 2022 must include automatic enrollment starting in 2025. With this nudge, millennials start earlier and save more consistently over their lifetimes. Plan sponsors report steady growth in plan participation since adding auto-enrollment, which hit a record high of 83% in 2022.
When baby boomers were coming up, there was no such thing as automatic enrollment, and their savings suffered as a result.
Fast Fact
While 401(k) plan participation rose for all age groups between 2006 and 2021, this still benefits younger savers (like millennials and Gen Z) most.
What Are the Five Main Generations?
The five main generations that are talked about in media, culture, commerce, and the world of work are:
- Silent generation – born 1925 – 1945
- Baby boomers – born 1946 – 1964
- Generation X (Gen X) – born 1965 – 1980
- Millennials – born 1981 – 1996
- Generation Z (Gen Z) – born in or after 1997
What Is the Average 401(k) Balance for Different Generations?
As of Q2 2024, the average 401(k) balance for each generation was:
- Boomers: $242,200
- Gen X: $182,100
- Millennials: $62,000
- Gen Z: $12,000
Which Generation Has It the Hardest Financially?
It’s impossible to definitively state which generation has it the hardest financially, as each group faces its own challenges and opportunities.
Like baby boomers, Gen Xers felt the impact of the Great Recession and the shift to self-funded retirement during their careers. Today, Gen X has more credit card debt than any other adult generation. The same goes for student loans, with an average of $44,146 per borrower, as of Q3 2024.
And while millennials entered the workforce during a period of economic recovery, many are struggling to afford homes thanks to steep jumps in home prices (a 17% rise in 2021 alone). Like millennials, Gen Z may struggle with disproportionately higher costs of living expenses, thanks to higher-than-average inflation in recent years. The COVID-19 pandemic disrupted Gen Z’s formative years, which could limit job opportunities and social experiences.
The Bottom Line
Baby boomers face tough retirement challenges due to the shift from pensions to 401(k)s, the Great Recession, and less time to save. Limited financial literacy and lower retirement plan participation worsened their situation. Millennials have been graced with more time, better financial education, and earlier savings habits, making them better positioned for retirement.
No matter what generation you’re a part of, financial education and early planning are the keys to securing a comfortable retirement.