It happens to everyone. It will happen to you, too. There’s no escaping it.
Sooner or later, you’ll be toiling away at your nine-to-five, and it will hit you. “I’m not going to spend the rest of my life doing this.” You might not say it out loud, but your brain certainly hears it.
That’s when you ask yourself all those retirement questions you’ve put off for the future. That’s when you realize the future is now.
How much do I need to save for retirement?
What generation has the most savings? Are you in that generation?
A chart published in a 2019 article by Money showed, on average, Baby Boomers have saved $152,000 for retirement. Compare this with $66,000 for Gen-X and $23,000 for Millennials. These numbers make sense when you consider older folks have had more time to both contribute to and grow their retirement savings.
Another way to measure this is where each generation stands on its path toward optimal retirement savings in terms of its state of mind.
“I’m split on this one because the clients I am working with that are about ready to retire now (ages 55-65) have a pretty serious and realistic framework,” says Brian Haney, CEO of The Haney Company in Silver Spring, Maryland. “I think it’s not so much a function of how financially prepared they may or may not be, but more a function of their life stage acceptance and emotional maturity. I think the Gen-Zers would be my other choice because they have a lot more financial education/resources out in the digital marketplace pointing them towards better financial habits. While the notion of ‘retirement’ is a very far-removed scenario given how young they are, I think they have a firmer grasp on the elements needed for success.”
Indeed, age-adjusted numbers suggest the “retirement readiness” scale may tilt towards the young.
In 2021, CNBC reported, based on U.S. Census Bureau median income figures, where each age cohort should be in terms of retirement savings. For example, by age 60, you should have saved $272,000. Contrast this to the Baby Boomer average of $138,900 (at that time). Similarly, Gen-X should have $204,000 saved at 50 (vs. the actual average of $98,900). Millennials should have $34,000 by age 30 and $136,000 by age 40 (vs. $63,300 generational average). The article did not address Gen-Z.
In what age group do people save the most for retirement?
In these relative terms, it appears Millennials may have the “most” retirement savings. This assumes they keep saving at their current rate. While being best positioned on the road to retirement, don’t think this means they have the highest rate of savings. Remember, this age group is only beginning to think about retirement, so their motivation to save may be less than older generations.
Nothing focuses the mind like a deadline. Retirement is the penultimate deadline of our lives. (The ultimate deadline usually being paired with taxes as the ones no one can escape). With a sense that the end of your career is fast approaching, you’re more likely to get things in order to better prepare yourself for that undiscovered retirement you hope to enjoy.
“I think that the age group that has the most realistic expectations for retirement is in the 45-55 age range,” says Lawrence Sprung, author of Financial Planning Made Personal at Mitlin Financial in Long Island, New York. “Hopefully, they have done a great job of saving towards retirement up until this point, because if they have not then they can find themselves way behind where they should be. I think this is because this age group is much closer to and has a better ability to envision slowing down or retiring, and this tends to be a bit more difficult for those in the younger age groups. The unfortunate thing here is that those in their 20s and 30s would greatly benefit from understanding and having realistic expectations about retirement so they can begin systematically saving as early as possible.”
Which generation is the most realistic about retirement?
Unrealistic expectations represent the leading cause of why some individuals struggle with retirement. If you know the age where these expectations are most naïve, you can more likely address them before they can do too much damage.
On the other hand, maybe time heals all wounds, including those that haven’t happened yet. The aging process itself may offer the answer to training your mind to consider only the most viable options as you enter retirement.
“What I see in the retirement plan space is that the age group of 50-60 have the most realistic expectations about retirement,” says Loreen Gilbert, CEO at Wealthwise Financial Services in Irvine, California. “They are now close enough to retirement that they are very serious about understanding what they will need to get there. They also have more discretionary income than when they were younger and starting in their careers.”
As you get into retirement, you’ll find many of the concerns you had will prove overblown. Still, having those concerns may have motivated you to get to where those worries have (or will) become moot.
“‘You don’t know what you don’t know,’” says Michelle Riiska, financial planning analyst at Fidelity’s eMoney Advisor in Virginia Beach, Virginia. “The fear of the unknown looms large. Folks who have already retired have likely had a moment to figure out how to proceed within their means and figure out how to make their current income and nest egg work, while those who are younger face the fear of giving up their income and the safety net that provides without a true understanding of what this will look like decades from now. The further you are from retirement, the more scared you may be about it, as there is a long period of time to consider. You may be scared about another pandemic, you may not know if you plan to have children, and you may not have decided where (or how) you want to live in your golden years. For someone who is already retired, there is a certain amount of uncertainty, such as health, family issues, etc, but the smaller timeline reduces some of those concerns. Even if they have not saved up as much as they wish, it may be easier to plan from a financial perspective as the ‘unknowns’ are a bit more limited.”
Ironically, this very fear of the unknown, if channeled correctly, might inspire younger generations to stay on the course of saving that will lead them to a comfortable retirement.
If not, there’s always the option of generating extra income through a retirement side hustle.