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How Prepared Are Boomers, Gen Xers & Millennials for Retirement?

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Are retirement goals falling short across generations?

According to a report released by Legg Mason, boomers have many goals still unmet for a comfortable retirement.

Of the top five goals that boomers said they wanted to accomplish in retirement, the majority are not accomplishing any of them. Boomers’ top goal is to “make sure that I am debt-free,” and only 42% say they have achieved it.

Boomers have had more success with other goals like having access to good health care and retiring early, with 73% and 76% respectively saying they’ve achieved these things.

And only half of boomers have achieved other goals like having enough money to “maintain my pre-retirement standard of living” and enjoying a “good retirement income.”

“Given the fact that people are living longer and are facing increasing health care costs and other rising economic pressures, the lesson here is vividly clear: For those who want to achieve their financial goals in retirement, they need to save more and invest for more growth long before they receive their last paycheck,” Thomas Hoops, executive vice president & head of product and business development at Legg Mason, said in a statement.

The report explores the reasons for this dilemma and how Gen Xers and millennials can avoid falling into the same traps. The survey was conducted among 900 U.S. participants, including 305 millennials and 458 investors with investable assets not including their home.


According to Legg Mason’s data, U.S. baby boomers that invest in defined contribution plans have a mean average of $263,000 saved in those plans, less than half of the $658,000 they say they will need in their defined contribution plan by retirement.

Older boomers, ages 65 to 74, are falling short of this goal with an average of $300,000 saved in their DC plans, the report finds.

According to the report, a conservative approach could lead to these shortcomings among boomers. The report looks at the baby boomers’ average asset allocation across all their investments and does find such an approach.

According to Legg Mason, the average asset allocation includes 30% in cash, 24% in equities, 22% in fixed income, 14% in nontraditional, investment real estate and gold/precious metals, and 8% in “other.”

“Looking at how boomers are allocated across all of their investments, we see they are rather conservative,” Hoops said in a statement. “If they are applying a similar, conservative approach to how they invest their [defined contribution] assets, they could be under-allocated to the higher growth opportunities they will need to achieve their saving goals. The same holds true for Gen X investors.”

QS Investors, a Legg Mason affiliate that manages retirement products, recommends that boomer investors should consider 50% or more of their DC allocation in equities. Even older boomers 65 to 74 should consider an equity allocation of more than 30%, based on QS Investors’ allocation models.

(Related: Thinking Boomer: Understanding This Generation and What They Need From You)

Gen Xers

For the Gen X age group, the good news is that more have a defined contribution plan – only 28% said they do not have one – with an average of $199,000 saved and a goal of $541,000 in their plan by retirement. However, they may not have the risk appetite needed to reach all their retirement goals.

The report finds that they also have a conservative asset allocation across all their investments. According to Legg Mason, the average asset allocation among Gen Xers is 25% in cash, 21% in equities, 17% in fixed income, 34% in nontraditional, investment real estate and gold/precious metals, and 4% in “other.”

QS Investors suggests that Gen X retirement savers should consider a greater allocation to equities in their portfolios. QS Investors’ asset allocations in retirement products for the Gen X age cohort include more 80% in equities.

(Related: Thinking Gen X: An Overdue Look at an Overlooked Generation)


Will millennials be better prepared for retirement?

“Conventional wisdom holds that younger Americans should take advantage of the longer time horizon before retirement to increase their investments in higher-risk asset classes like stocks,” according to the study. “However, U.S. millennials don’t seem to have gotten the memo.”

Legg Mason’s recent survey showed that on average millennials hold less in stocks than their elders, influenced heavily by the legacy of the 2008-’09 financial crisis.

Equities make up a relatively small portion of millennials’ portfolios: just 15%, as opposed to 24% for baby boomers, according to the Legg Mason report.  

“That’s a far cry from the level that a typical U.S. advisor would recommend to investors with decades of potential appreciation ahead of them,” the report states.

What’s the source of younger Americans’ caution? Debt — like college loans — plays a small part, but a larger influence is the 2008 global financial crisis. Four in five millennials (82%) say the crisis still influences their investment decisions. More telling, 57% say they are strongly influenced by the crisis and its aftermath — far more so than Gen Xers (39%) and baby boomers (13%).

The study does find a silver lining among its millennial data. Millennials are more — “and arguably better,” the report says — diversified than other age cohorts, with far more money in alternative asset classes and strategies than their elders. Nontraditional strategies, precious metals and investment real estate represent 39% of their investible assets, compared with just 14% for boomers.

— Check out Thinking Millennial: How to Woo the Largest Generation on ThinkAdvisor.