generation x better prepared for retirement than experts thought
Credit: Pixabay/CC0 Public Domain

Only about one in three Americans have enough saved for retirement, according to a national survey. But new research from the University of Georgia offers what might be a silver lining to the doom and gloom: Generation X doesn’t appear any worse off than the baby boomers.

That said, neither group appears to have saved enough to be on track with their retirement needs. And the millennials are even further behind.

“The difference we see is because of the differences in age and because Generation X isn’t as far along in their careers as the baby boomers,” said Swarn Chatterjee, corresponding author of the study and a professor in the financial planning program in the College of Family and Consumer Sciences.

“But when we look at how much the generations should be saving based on how much they have, while the millennials are further behind, there isn’t really that much of a difference between Generation X and baby boomers in terms of trajectory of retirement planning and preparedness.”

The researchers developed a model that analyzes the preparedness of individual respondents to the 2019 Survey of Consumer Finances, a national dataset conducted by the Federal Reserve. This strategy enabled them to create a unique retirement baseline for each of the dataset’s more than 4,500 households based on an individual’s age, current income, expected retirement age, life expectancy and money management strategies.

There isn’t much literature on differences in retirement prep of Generation Xers and millennials. Previous analyses looked largely at asset holdings across generations at a certain age, only focused on households closest to retirement or used subjective measures to gauge retirement readiness, such as how prepared for retirement individual respondents felt.

The present study meets the participants where they are, so to speak.

The researchers’ new measurement is based on each individual household’s real financial situation, meaning they are compared to their own retirement expectation rather than a generalized one for their entire generation.

Chatterjee and his colleagues then determined how close each household was to reaching its retirement goals and used that measurement for comparison against those in other generations.

Lack of financial knowledge hurts retirement preparation for all generations

Over the last several decades, the American workforce has shifted dramatically.

Previous generations, including many of the boomers, largely stayed at one or two companies for the duration of their career. And those companies frequently offered pension plans that guaranteed an income to loyal employees after retirement.

Those types of retirement plans are almost unheard of these days. As a result, millennials and Gen Xers wind up job hopping for better pay, benefits or both.

Now companies offer 401K plans where it’s on the employee to pay and save for themselves, often with a company contribution on top. But that means employees have to manage their own portfolio.

“There is a fear that most people do not have the financial knowledge to realize how much they need to save,” Chatterjee said. “And the majority of people underestimate their needs.”

Because people are living longer than previous generations, that means they also will likely need more retirement funds to survive those tacked on years.

Financial advisers, education programs key in retirement planning

But all hope isn’t lost for those in younger generations with inadequate retirement savings, Chatterjee said.

They’re still early in their careers and have more time to make up that difference in their portfolios.

“There are things we can control, and there are things that we cannot control,” he said. “We cannot control what’s going to happen in the economy in the future. But what we can control is our financial literacy.”

From a policy standpoint, that means creating more opportunities for younger generations to receive financial education. The challenge is that there aren’t enough affordable and accessible financial advisory services right now, Chatterjee said. That’s something policymakers will have to address to help individuals best plan for their futures.

The study also found that factors like receiving a college education and willingness to make riskier investments earlier on in an individual’s career may have a positive effect on their retirement planning.

The research is published in the International Journal of Financial Studies.

More information: Jia Qi et al, Retirement Preparedness of Generation X Compared to Other Cohorts in the United States, International Journal of Financial Studies (2022). DOI: 10.3390/ijfs10020045

Provided by University of Georgia

Citation: Generation X better prepared for retirement than experts thought (2022, November 29) retrieved 29 November 2022 from https://phys.org/news/2022-11-generation-experts-thought.html This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no part may be reproduced without the written permission. The content is provided for information purposes only.

TECH NEWS RELATED

TikTok EU ban on the table if social network doesn’t comply with new laws

TikTok is one of the most popular social networks out there. But TikTok is also a cause of concern for western governments that worry about the company’s ties to the Chinese government. TikTok can’t run on most devices the US government issues, and there has been talk of a ...

View more: TikTok EU ban on the table if social network doesn’t comply with new laws

Don’t Buy a Foldable Until Samsung Brings This Prototype to Life

Samsung Display via The Verge The world of foldable phones is surprisingly stagnant. The Galaxy Z Fold gets a tiny little upgrade every year, and rival phone brands loosely copy Samsung’s homework. But a new Samsung Display prototype called the “Flex In & Out” could turn this narrative on ...

View more: Don’t Buy a Foldable Until Samsung Brings This Prototype to Life

Best free sports streaming apps in 2023

Cutting the cord on cable television is something tons of people have done over the past five years. But that hasn’t proven to be the smartest way to continue to watch sports. Whether it comes from premium sports website subscriptions to keep tabs on your favorite players, or even fantasy ...

View more: Best free sports streaming apps in 2023

Avengers 5 might have Ant-Man in it, Quantumania star teases

The first MCU Phase 5 movie will be Ant-Man and the Wasp: Quantumania, the third installment in the Ant-Man franchise and a film with much higher stakes than the previous episodes. The sequel will deliver the MCU’s first Kang (Jonathan Majors) villain after we met a somewhat good He Who ...

View more: Avengers 5 might have Ant-Man in it, Quantumania star teases

Sharing a Netflix Account? Get Ready to Pay For It

DANIEL CONSTANTE/Shutterstock.com Netflix is about to get serious in its efforts to eliminate freeloaders. If you share a Netflix account with family or friends outside your household, get ready to pay for it. A new “paid sharing” system could roll out starting next month, and you’ll have to pay a ...

View more: Sharing a Netflix Account? Get Ready to Pay For It

‘7 Wonders’ Board Game Gets a New ‘Edifice’ Expansion

Asmodee and Repos Production Board game lovers have a wonderful reason to celebrate today. Board game makers Asmodee and Repos Production announced their latest collaboration: 7 Wonders Edifice, an expansion to the popular board game 7 Wonders. The game launches on February 24th for $29.99. 7 Wonders: Edifice adds ...

View more: ‘7 Wonders’ Board Game Gets a New ‘Edifice’ Expansion

T-Mobile Kicks Off 2023 With Another Data Breach

r.classen / Shutterstock.com In a press release, T-Mobile confirms that it detected a data breach in its systems on January 5th. A “bad actor” managed to steal personal information (but not financial data) from around 37 million customers. This is the eighth T-Mobile data breach since 2018. The hacker ...

View more: T-Mobile Kicks Off 2023 With Another Data Breach

Apple appeals to UK competition watchdog investigation about mobile browser dominance

Apple has filed an appeal against the UK’s competition watchdog regarding its dominance of mobile browsers in the cloud gaming market, reports Reuters. The Competition and Markets Authority started investigating this dominance by the Cupertino firm and Google. Lawyers representing Apple believe the investigation should be reviewed as CMA ...

View more: Apple appeals to UK competition watchdog investigation about mobile browser dominance

Galaxy S23 Ultra release date and specs leak finally reveals everything about the new model

WhatsApp for iOS rolling out the ability to create a chat with yourself

Amazon Prime Music Unlimited changes streaming prices, now matches Apple Music

Deadpool 3 and Secret Wars to feature Fox’s X-Men, according to Marvel insider

Report: OLED iPad Pro still on track for 2024 release, 2026 for MacBook Pro

How to negotiate over practically anything

HomePod 2 praised in exclusive hands-on before launch

M2 Pro MacBook Pro Amazon preorder deal gives you $50 off

What “choice” means for millions of women post-Roe

Singapore FinTech firm Pilon secures $5.2M seed funding led by Wavemaker Partners

Capital Square Partners and Basil Technology team up for $700M tech fund in Asia

This feel-good movie about man’s best friend is dominating Netflix

OTHER TECH NEWS

Top Car News Car News