How Retirement Differs for Different Generations

Every generation faces different obstacles for retirement. But if you were to tune into any financial talk show today, you might hear the host say that retirement isn’t even close to how it was for your parents and grandparents. Why?

Nowadays, people have a variety of issues that are different in scope or that weren’t even around for prior generations. Never-before-seen economic conditions (such as those tied to the COVID-19 pandemic), lengthened lifespans, and evolving financial risks are all contributors to this.

What’s more, the definition of retirement has changed. Nowadays, retirees are taking their golden years by the horns. They are enjoying full lives of second career acts, budding entrepreneurship, volunteerism, and pursuit of lifestyles that might have not been possible for their parents or grandparents.

Here’s a look at why retirement is different for people today than it was in the past — and how you personally can be ready for the changes.

1. Longer Lifespans

Folks of the baby boomer generation are living longer than those before them. In the past, people were expected to retire and then be lucky to live for another decade or so. But thanks to advances in medicine and technology, people are spending longer in their retirement years.

While life expectancy has halted or even dropped in recent years, it remains head and shoulders above the life expectancy of a half-century or even 30 years ago.

This means that retirees will have to stretch out their money and make it last longer than past generations did. The continuing disappearance of pensions in workplaces across the country only adds to this complex issue.

2. Great Economic Uncertainty

Those before us faced grueling times, economically and otherwise. The Great Depression. The world wars. Other demanding wars abroad. Social unrest in the mid-twentieth century. All those times had their own unique conditions and challenges to overcome.

Today, baby boomers near retirement or in early retirement face uncertainty of a new sort. The novel coronavirus brought disruptions to markets and the economy in never-before-seen fashion. Its growing scope as a public health concern had immediate effects, and it’s just not clear as to how extensive its toll might continue to be in the future.

At the very least, current events such as these remind us that black-swan events can come out of nowhere. Given how seemingly everyone’s lives were affected, it’s prudent for retirees and pre-retirees to be ready for when their plans might go sideways with changes like this.

For example, the record-breaking market swings in 2020 brought huge, hard-to-predict sequence risk for those who might have been planning to retire soon. How can you prepare for your financial plan to cope with the unexpected?

One way is by adding strategies that bring more stability and predictability to your overall plan. You might find peace of mind in combining your current financial strategy with contractually guaranteed strategies that balance out risk and uncertainty with guaranteed income, protection of your money, and growth potential.

Your financial professional can walk you through options that might make sense for your personal situation.

3. Rapidly Increasing Cost of Living

Inflation has been called a “silent retirement killer,” and that is for good reason. In some ways, some inflation is generally good, as it’s the sign of a growing economy.

Take, for example, the growth in the stock market as an indicator of how big companies have scaled and propelled the economy to new heights. Just in 2007, the S&P 500 index was at 1,565 points. A decade later, it well exceeded 3,000 points (at the time of this writing). In other words, the market index doubled in just a 10-year window.

What are some other signs of how the economy has grown? It’s easily seen in housing prices. From the 1970s until now, the median cost for a new home in the U.S. has risen over 300%. What’s more, the cost of many household goods has doubled or tripled from even just a couple of decades ago.

With the cost of living going up at a faster rate than many household incomes are increasing, today’s retirees would be wise to plan ahead. An effective plan will include solutions for how they will manage the rising costs of goods and services in the future.

In fact, retirees may continue to see cost-of-living increases coming at a faster pace than prior generations did. Time will tell on this front, but the most important takeaway is it’s prudent to plan ahead.

4. Record Numbers of People Retiring

While many Americans have already been setting records for retirement, there are more ahead. According to many sources, from Pew Research to the U.S. Census Bureau, tens of millions of baby boomers will be retiring until 2040.

In turn, this will bring new opportunities and challenges. Swelling numbers of retirees will depend on Social Security and Medicare. Social Security may look different in some way, two decades or so from now. When Social Security began, there were 16 workers supporting each retiree. Now there are only two. Medicare may change in some way from what it is now, as well.

More people will be joining the age-70+ crowd. As required minimum distributions kick in for them, they will be forced to take money out from their retirement accounts. Of course, this is apart from already taking account withdrawals for income. 

Many generation Xers are also finding that they will have to assist their parents. This dilemma has effectively made Gen Xers a “sandwich” generation. They are helping both their parents and children with retirement and educational expenses.

Planning for Your Retirement, No Matter What the Future Holds

Time will tell what the future holds for tomorrow’s retirees. But retirement today is a vastly different proposition than it was for past generations.

Inflation. Increased lifespans and longer retirements. Economic uncertainty. Ongoing consequences from recent black-swan events. The good news is while baby boomers and pre-retirees face these unique issues, they have great opportunities ahead of them as well.

With proactive planning, you can enjoy a comfortable lifestyle and be confident in knowing you have a plan for uncertainty. It starts with taking steps now to prepare for your financial future. An experienced, knowledgeable, independent financial professional can help you evaluate your current progress and see what other steps you can take to reach your goals.

Looking for someone to guide you? Use our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your goals, concerns, and situation. Should you want a personal referral, please call us at 877.476.9723.