How Retirement Attitudes Of Baby-Boomers And Gen-Xers Differ

The United States Department of Labor (DOL) defines Baby Boomers as those born from 1946 to 1964, and Generation-Xers as those born 1965-1979. As is expected from individuals who are close in age, there is similarity in retirement attitudes among these two generations. However, there are also differences, some of which have led to different levels of retirement readiness and retirement savings.

In order to make a reasonable comparison, it is sometimes necessary to divide the baby-boomer cohorts into two groups, which has been done when available data allows. Early Boomers are 1946-1955 and Later Boomers are 1956-1964.

Retirement Savings Attitude and Results - In its 2011 Retirement Confidence Survey (RCS), the Employee Benefits Research Institute (EBRI) compared the attitudes towards retirement savings and amounts actually saved by age.

The fact that early boomers have the largest percentage of individuals with more than $250,000 saved is no surprise, as older individuals are more likely to have larger amounts saved because they have worked longer and have had more time to accumulate those savings. Notwithstanding, it begs the question of whether this is enough to meet their retirement income needs.

Boomers Have Lower Retirement-Readiness Confidence - While a large percentage of respondents say they have saved for retirement, the level of confidence that this savings is sufficient to meet their retirement income needs is low and is critically so for boomers. According to a report from the Insured Retirement Institute (IRI), 63% of baby boomers lack full confidence that they will have enough money to cover their retirement needs, whereas only 33% of generation-Xers fall into that category.

This concern is not unfounded considering that individuals age 55 may need up to $550,000 for men and $654,000 for women to cover health insurance premiums and out-of-pocket expenses in retirement when they reach age 65 in 2018.

Generation X More Willing to Take Investment Risk - Compared to baby boomers, generation-Xers are more likely to take above-average risk when investing their retirement savings. Baby boomers are more likely to choose average risk in return for average gain with a large percentage unwilling to take any risk at all. Since the amount of return on investments is often determined by the amount of risk the investor takes with his or her assets, this approach will ultimately affect how much the members of each group invest based on such levels of risk tolerance.

Boomers Withdraw More and Add Less - According to the IRI, the economy significantly affects people's retirement-saving plans. With widespread layoffs and dim job prospects, about 15% of generation-Xers have had to dip into their retirement savings to cover everyday living expenses and 23% have stopped contributing to retirement accounts. Along the same vein, 20% of baby boomers have made early withdrawals from their retirement accounts and 32% have stopped contributing.

The Bottom Line - It is expected that individuals who are closer to retirement will have a more realistic view of retirement readiness. As such, it should not be surprising to find that more baby boomers are concerned about financial security during retirement than generation-Xers. Nonetheless, one's retirement readiness is often determined by one's attitude towards retirement and the actions that one takes towards saving for retirement.

Regardless of age, individuals can get themselves out of this statistical rut by improving their attitudes and taking more positive actions towards saving and planning for retirement when possible.

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