Millennials Could Fare Worse in Retirement Than Older Generations

The Center for Retirement Research projects that 40% of those born between 1976 and 1985 will be unable to replace 75% of the income they received between the ages of 55 and 54 when they reach age 70.

Given the fact that there have been reports that in the coming decades, many retirees could live in or near poverty, the Center for Retirement Research at Boston College decided to examine the prospects for late Gen-Xers, those born between 1976 and 1980, and early Millennials, those born between 1981 and 1990. 

In its white paper, “Retirement Prospects for the Millennials: What is the Early Prognosis?,” the Center concludes that 40% of those born between 1976 and 1985 will be unable to replace 75% of the income the will received between the ages of 50 and 54—a significantly higher percentage than members of the Silent Generation born between 1936 and 1945 (32%) and of Baby Boomers born between 1956 and 1965 (30%).

The Center gives several reasons why prospects for Millennials are dimmer than for older people, starting with the increase in Social Security’s full retirement age and the fact that pension plans have dramatically declined. In addition to these factors, life expectancy continues to grow, health care costs keep rising and people continue to take on more debt—not to mention the Great Recession’s impact on household wealth and employment.

However, how long these younger people are able to work will impact their retirement savings, and this is largely dependent on their health, the white paper says. In addition, the future of Social Security, health care costs and long term care costs will play a big role.

The research suggests “marriage is an important source of retirement security, because it allows spouses to pool resources and insure against risks and qualifies retirees for spouse and survivor benefits from Social Security. However, the institution of marriage has been eroding for decades.” Homeownership has also declined from a high of 69% in 2005 to 64% in 2017 following the Great Recession.

In addition, the median debt for people born between the 1952 to 1957 is $62,200, and for those born between 1964 to 1969 it is $77,500. This compares with only $18,700 for those born between 1940 to 1945. The Center attributes this to “increases in housing prices, increased access to credit, low and stagnating incomes and student loan debt.”

In conclusion, the Center says, “how future generations fare in retirement will depend largely on how much they earned and saved when they were younger. Many recent employment, earnings and savings trends are discouraging. Men’s labor force participation rates prior to age 55 continue to decline, and their median wages have been stagnant for decades. Full-time male workers born in the late 1970s and early 1980s were less likely to participate in an employer-sponsored retirement plan than previous cohorts, and their female cohorts were less likely to participate than those born a decade earlier. Adults younger than retirement age have accumulated less wealth than previous cohorts.”

However, the future of Social Security, stock market returns, how long people remain in the work force, housing prices, inflation and interest rates could improve prospects for older Generation Xers and younger Millennials.

The Center’s full report can be viewed here.