Your Generation Has Its Own Take on Retirement

Whether you are one of the estimated 75 million Baby Boomers, 66 million Gen Xers or 75 million Millennials, you have an opinion on your retirement, whether it’s now or not quite here yet.

What’s also important are the concerns you most worry about most and how ready you think you will be when your retirement day finally arrives. Perhaps not surprisingly, many of us differ in those retirement views by generation. And it matters because of how millions of Americans approach their financial affairs.

Spouses, parents, children, family members, friends, colleagues. These people are a few of many folks to whom Americans may turn for seeking second opinions, weighing their retirement anxieties against others’ own, gauging their financial progress, and dealing with other money matters.

Luckily for all of us, companies conduct periodic research to give us insight into what drives our attitudes and behavior on planning for and living in retirement. Their studies can also show how our expectations may actually match up—or in many cases—differ from what we believe lies ahead for us. These results have the potential to enlighten us into action to better help us achieve what we each want for our own retirement.

In its just-published seventh annual Retirement Income Strategies and Expectations (RISE) survey of investors, Franklin Templeton Investments sought to understand perceptions and concerns about retirement savings strategies. The RISE survey specifically looked at how retirement concerns differ by generation.

Not only did the survey find differences between generations, it also uncovered differences between genders within the same generation.

Medical Expenses in Retirement Concern Us All

It turns out that Americans have a few key concerns in common. Remember how we mentioned Baby Boomers, Gen Xers, and Millennials beforehand?

Across these generations, paying for medical and pharmaceutical expenses in retirement was at the top of every generation’s list of worries, at 31%. Perhaps they heard the cost estimates like that from Fidelity. According to them, a couple who retired in 2017 can expect to spend an average of $275,000 for healthcare costs throughout retirement.

In 2018, Fidelity estimates the price tag will soar to $280,000 for a couple of retirement age. In the graph below, you can see the year-to-year healthcare cost projections that have been published since it began in 2002.

“When determining your retirement savings strategy, healthcare planning should be a major part as it can directly impact your retirement,” said Kevin Murphy, senior vice president, national retirement plan strategist for Franklin Templeton’s Defined Contribution Division – US.

“Health Savings Accounts are often thought of as IRAs or 401(k) plans for medical expenses, and they can complement long-term retirement savings strategies. While there are a lot of options, this is where financial advisors can be helpful to determine the best strategy for each individual.” 

Even while health costs topped the financial stressors list, almost half of people of all generations in the survey (46%) didn’t have a plan for how they would cover them.

Following healthcare cost concerns were worries about paying off debt (18%) and how to pay for assisted living expenses (15%), the RISE survey found.

Beyond these common threads, the survey reveals things start to get interesting as each generation grapples with taking the right steps to put themselves in a position of financial strength during retirement.

Gen Xers and Baby Boomers Focus on Different Concerns

Approximately 6 of every 10 Gen X women (62%), especially those ages 38-45, are the most concerned about managing their retirement income to meet their retirement expenses.

When you factor in both genders, Gen X overall shows that 49% are concerned about managing their retirement income to meet their retirement expenses. Again, counting both Gen X men and women, 40% say running out of money during retirement is their top concern.

Baby Boomers, by contrast, count health issues as their top concern during retirement (37%). This greater concern may be because they are closer to retirement age and have begun to experience — or at least be more aware of — the potentially expensive health challenges they could face.

Still, 37% of Baby Boomers are also worried about having enough retirement income to meet their retirement expenses.

Boomers More Likely than Gen Xers to Be Prepared

Concern over an issue doesn’t necessarily correlate to putting strategies into place to alleviate these worries. The RISE study found a surprisingly high 67% of Gen X women don’t have a strategy to generate income for a retirement that could last 30 years or more. Among Baby Boomer women, 51% admit to lacking such a strategy.

To combat this potential income deficit, female Gen Xers say they are prepared to work longer and retire later to address this (at 58%). Among Baby Boomer women, only 42% say they would delay retirement in these circumstances.

And what about other findings from Franklin Templeton? Here are some other insightful takeaways from the study:

• One-third of respondents (33 percent) are concerned about running out of money in retirement, which exceeds anxieties about health issues (26 percent) and having an inactive lifestyle (11 percent).
• Social Security will be the primary retirement income source for almost half of all respondents (49 percent). The second primary income source will be a current or prior workplace retirement plan (41 percent), and third is a checking and savings account (27 percent). 
• One-third (33 percent) of workers said not having enough savings would be the most likely reason they could delay retiring. Comparatively, only three percent of current retirees said their retirement was delayed for this reason.
• Most Americans in the study (62 percent) consider a financial advisor important to retirement planning. However, less than one-third (29 percent) of those surveyed currently work with a financial advisor.

How Generations See the Road to Retirement Readiness

According to research from T. Rowe Price, while various generations are at different levels of preparedness, the age groups have different ideas about how to best get ready.

As a group, baby boomers have prioritized their retirement savings and contribute more to their retirement savings than any other generation. T. Rowe Price reports that retirees who are in their first five years of retirement are living on an average of 67% of their preretirement income, and 88% say that they are satisfied with retirement so far.

And how about Gen Xers? Their financial demands have increased alongside their earning power. Many face supporting young children and aging parents simultaneously— “which can make it challenging to prioritize savings goals,” T. Rowe Price reports.

“About 70% of Gen X workers felt somewhat, or very, comfortable that they will be able to meet their financial goals in retirement. However, 28% of Gen Xers surveyed believe they may run out of money in retirement, given the savings they have in place right now.”

No Matter Your Generation… Are You Prepared?

While we may share some common concerns, retirement planning should be highly customized and can’t rely on generational generalities.

“This year’s RISE survey findings really highlight how individualized a person’s retirement savings plan needs to be,” said Michael Doshier, vice president of Retirement Marketing at Franklin Templeton Investments.

“The differences between generations, even among those of the same gender, show that comprehensive retirement planning requires a holistic view that incorporates demographic differences and short-term risk tolerances as well as long-term goals,” Doshier concluded.

Need Help with Planning for an Income-Rich Retirement?

While nothing is foolproof, studies and research confirm that working with a financial professional may increase your chances for success. Those who receive from a financial professional generally report higher savings, more financial confidence, and better overall sense of financial well-being.

If you would like to start with a personal appointment to discuss your financial goals, financial professionals at SafeMoney.com can help you. Use our “Find a Financial Professional” section to connect with someone directly. Should you need a personal referral, please feel free to call us at 877.476.9723.