Generations View Different Retirement Paths

Varying expectations among Baby Boomers, Generation X and Millennials

By Stephen Miller, CEBS May 3, 2014

As the last of the Baby Boomers turn 50 in 2014 and the first members of Generation X prepare to mark their midcentury birthday next year, new research shows differing expectations about retirement among the generations in the workforce.

Baby Boomers (born between 1946 and 1964) were already mid-career when the retirement landscape shifted from defined benefit pensions to 401(k) or similar defined contribution plans. They have not had a full 40-year time horizon to save in 401(k)s and experience the full effects of long-term compounding of their investments.

Boomers Seek Phased Retirements

“Many Baby Boomers were hit hard during the Great Recession and, unlike younger generations, they have less time to financially recover before they retire,” said Catherine Collinson, president of the Transamerica Center for Retirement Studies, announcing the findings of the 15th Annual Transamerica Retirement Survey. The center is a nonprofit research foundation funded by Transamerica Life Insurance Co.

The findings, based on responses from 4,143 full-time and part-time workers surveyed in February and March 2014, show Baby Boomers are most likely to have a total household retirement savings of $127,000 (estimated median), up from $75,000 in 2007 but not nearly enough to meet retirement needs for many. As a result:

  • 65 percent of Baby Boomers plan to work after age 65.
  • 52 percent expect to continue working at least part-time when they retire.
  • Only 21 percent plan to immediately stop working when they retire.

Most of those who plan to continue working say it’s for reasons of needed income or to keep employer-provided health benefits. But many find health issues, job loss (and inability to find new employment) or other unforeseen circumstances mean retiring earlier than anticipated. “Baby Boomers are not being sufficiently proactive about taking important steps to help ensure that they continue working beyond 65 or have a Plan B if retirement happens unexpectedly,” said Collinson. “Only 26 percent of Baby Boomers have a backup plan if forced into full retirement sooner than expected.”

The survey also revealed a pervasive disconnect between Baby Boomers and their employers. While many Baby Boomers have intentions of shifting from full time to part time as they transition into retirement, only 21 percent say their employers have phased retirement programs in place to accommodate such a shift.

“Baby Boomers who are envisioning a transition into retirement that involves working [part time] should do a reality check whether their current employers will support them,” Collinson advised. “If not, they’ll need to seek employment elsewhere or pursue something entrepreneurial. All of these scenarios require being proactive and strategic.”

Generation X: The 401(k) Generation

Generation X (born between 1965 and 1978) entered the workforce in the mid- to late-1980s just as 401(k)s were being implemented and defined benefit pensions were beginning to disappear. They are part of the first generation to have access to 401(k)s for most of their working careers.

Unfortunately, Generation X also has been more likely than other generations to take advantage of 401(k) features such as loans and early withdrawals, which when initially introduced were thought to promote plan participation, but are now viewed as a double-edged sword that can be destructive to the long-term growth of retirement nest eggs. Twenty-seven percent of current 401(k) participants have taken a loan or early withdrawal, the survey found.

Generation X workers estimate that they will need to save $1 million (median) to retire with a comfortable lifestyle, which reveals a profound gap compared to what they have saved to date:

  • The total household retirement savings for Generation X is $70,000 (estimated median), an increase from the $32,000 reported in 2007.
  • Most members of Generation X (54 percent) plan to work past age 65 or do not plan to retire.

“Generation X will begin turning 50 next year, a loud wake-up call for them to get laser-focused on planning, saving and investing for retirement. Their clock is ticking but they still have time to substantially improve their retirement prospects,” said Collinson.

Millennials: The Digital Do-It-Yourself Generation

Millennials (born after 1978) have lofty aspirations about their future retirement. The majority (60 percent) of Millennials plan to retire either before or at age 65. Most plan to continue working when they retire, with many intending to do so for enjoyment.

“Millennials are a digital do-it-yourself generation of super savers,” said Collinson. “They’ve heard and responded to the message they need to start early and save as much as possible.” The survey found that:

  • 70 percent of Millennials are already saving for retirement, and they started at an unprecedented age of 22 (median).
  • Among Millennials who are offered a 401(k) or similar plan, 71 percent are participating in the plan and participants contribute 8 percent (median) of their annual salary.
  • Among Millennials currently participating in a plan where their employer offers a matching contribution, the salary contribution rate increases to 10 percent (median).

Millennials also are early adopters of digital technologies to assist with their savings:

  • 71 percent say mobile apps to manage their accounts are helpful (compared to just 47 percent of Baby Boomers).
  • 68 percent say that mobile apps from their plan provider, including tools and calculators, are helpful (compared to just 49 percent of Baby Boomers).
  • 61 percent say information on social media (e.g., Twitter, Facebook) from their plan provider is helpful (compared to only 28 percent of Baby Boomers).

Hungry for more education, nearly three in four (73 percent) say they would like more information and advice from their employers on how to achieve their retirement goals.

“Millennials take their retirement benefits very seriously,” said Collinson. “Two out of three Millennials say they would likely switch employers for a similar job that offered better retirement benefits.”

Retirement Remains Top Financial Worry

In separate research, Gallup's Economy and Personal Finance poll, conducted in April 2014, shows that a firm majority of Americans—59 percent—are worried about not having enough money for retirement, surpassing eight other financial matters.

Americans’ Top Five FInancial Concerns

Very worried or moderately worried

Not having enough money for retirement.


Not being able to pay medical costs in the event of a serious illness or accident.


Not being able to maintain an enjoyable standard of living.


Not having enough money to pay off debts.


Not being able to pay medical costs for normal health care.


Source: Gallup

“For a country that now has a life expectancy at birth of 78.7 years, retirement savings for post-work years is considered a matter of national importance,” the Gallup report states.

Similar to the Transamerica Center's findings, Gallup's research shows that personal financial concerns vary significantly across age groups. The top problem for the broadly defined group of middle-aged Americans—those ages 30 to 64 in Gallup's methodology—is not having enough money for retirement. For this group, about 7 in 10 worry about not having enough savings to retire.

Young Americans ages 18 to 29 worry most about paying medical costs in the event of a serious illness or accident (52 percent), perhaps a result of the lack of savings typically characterizing that age group.

Older Americans, those ages 65 and older, also worry most about being able to pay medical costs in the event of a serious illness or accident. “Given the formidable cost of protracted, continual medical care that often characterizes older Americans' later years,” many senior citizens realize “their health insurance alone can't handle such a financial burden,” the report surmises.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller

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