Are you Saving Enough for Retirement? According to a Pew Report, Probably Not
The majority of Americans haven't saved enough money for retirement and probably never will be able to save enough. Though some generations are better than others, according to The Pew Charitable Trusts. The Washington D.C. based organization released a report showed some generations are doing a better job than others when it comes to socking away for retirement.
The Retirement Security Across Generations report shows those born between born between 1946 and 1955 (early baby boomers) are nearing retirement in the best financial shape compared to prior generations. These early boomers are also doing a better job than those born after 1955 (late boomers) and Generation X, born between 1966 and 1975.
I can understand why the early boomer generation is faring better than previous generations. Prior generations' ideal scenario was working at one company and relying on their pensions for retirement. Of course, that is no longer a viable option for most people.
I can also understand why early boomers are faring better than late boomers and Gen Xers. They were in a position to enjoy one of the largest bull market runs in the 1990s. They also bought homes long ago, enabling them to take advantage of the housing bubble in the 2000s. In contrast, younger generations most likely bought homes during the housing bubble and watched their 401ks tank when the financial crisis hit.
Interestingly, late boomers are not doing as well as Gen-Xers. Late boomers have lower net worth than Generation X even though both are in the 30s and 40s now. Both late boomers and Generation Xers are way behind in net worth when compared to early boomers. As of 2010, early boomers’ asset levels were 27 times higher than their debts. Late boomers’ assets were about four times higher than their debts, and Gen-Xers’ assets were about double their debts.
Everyone's net worth declined during the recession but those who took the hardest hit was Generation X. Early boomers lost 29 percent of their median net worth. Late boomers lost 25 percent of their median net worth. Gen-Xers really took it on the chin, losing 45 percent of their median net worth, setting them even farther behind.
The only way the younger generations can make up the lost time is to save and invest as much as they possibly can. The younger generations can align their portfolios in riskier assets to try to earn higher returns. They also have the time to recover from any drastic stock market declines. There isn't really any alternative when savings rates and bond yields are so low.
You can read an overview of Pew report here: Retirement Security Across Generations
Banking & Finance InformationPersonal Finance