A new report from Wells Fargo Investment Institute explores how each generation in the workforce today — baby boomers, Generation Xers and millennials — is approaching retirement and how today’s trends are redefining retirement in the 21st century.
Perhaps the most recognizable difference is how each expects to fund its retirement.
Millennials and Gen Xers expect 401(k)s and IRAs to be the primary source of funds for their monthly expenses in retirement, compared with baby boomers who say Social Security will be — or is already — their main source of funds, according to the report.
“Millennials more than any other generations are going to have to rely on themselves to save for their retirement. With the other generations, some of them still have access to pensions, they may have more access to Social Security than what would be left for the millennial generation,” Veronica Willis, investment strategy analyst for Wells Fargo Investment Institute, told ThinkAdvisor.
The report, “Reimagining Retirement: Generational Strategies for 21st Century Challenges,” defines baby boomers as those born between 1946 and 1964, Gen Xers as those born between 1965 and 1980, and millennials as those born between 1981 and 1997.
How are baby boomers approaching retirement differently than past generations?
“We’re seeing that a lot of [boomers] are staying in the workforce longer than older generations have,” Willis said. “Or, even after retirement, they’re returning for part-time work or maybe doing consulting work.”
For some boomers, a job may supplement Social Security income. For others, working part time offers the opportunity to stay active and intellectually engaged, and postpone dipping into their retirement assets, according to the report.
“You want to stay intellectually focused on your career, or maybe there’s a passion project that you want to work on,” Willis said. “Maybe you’re wanting to start your own business. We’re seeing entrepreneurship increasing for that cohort a lot.”
According to the report, the percentage of seniors (65 and older) in the U.S. workforce should continue to rise. In 1996, there were 12.1% of seniors in the workforce. That grew to 19.3% in 2016 and is expected to grow to almost 22% by 2026.
How prepared do Gen Xers feel they are for retirement?
This generation is sandwiched between two larger cohorts, the older baby boomers and younger millennials, and as a result must balance multiple priorities.
“They’re paying for care for aging parents and they’re saving for their children’s education so there’s not as much left over for them to save for retirement,” Willis explained. “They’re being pulled in a lot of different directions.”