Retirement is an inevitable stage of life that eventually catches up with everyone. Even if you don’t voice it out loud, at some point while toiling away at your nine-to-five job, eventually, it will dawn on you that spending the remainder of your life in this manner is not what you desire. That’s when the questions about retirement start surfacing, and you realize that the future is now.
One important question is how much you need to save for retirement. When considering the generations and their savings, it becomes apparent that older individuals have had more time to contribute to and grow their retirement savings. According to a chart published in a 2019 Money article, Baby Boomers, on average, have saved $152,000 for retirement, Gen-X has saved $66,000, and Millennials have saved $23,000. These figures align with the notion that older individuals have had more opportunities to build their retirement funds.
Another way to gauge the realism of each generation about retirement is by assessing their mindset and acceptance of their life stage. Brian Haney, CEO of The Haney Company, notes that individuals on the brink of retirement (ages 55-65) tend to have a serious and realistic framework.
Financial education and resources also play a role in shaping realistic expectations. Haney also recognizes Generation Z as a potential contender due to their access to digital platforms that offer guidance on financial habits, despite retirement being a distant concept for them.
Looking at age-adjusted figures, CNBC reported that each age should have a specific amount saved for retirement. For example, by age 60, individuals should have saved $272,000, but the Baby Boomer average was $138,900. Similarly, Gen-X should have saved $204,000 by age 50, compared to the actual average of $98,900. Millennials should have saved $34,000 by age 30 and $136,000 by age 40, while the generational average was $63,300.
Regarding which age group saves the most for retirement, Millennials seem to be the leaders based on relative terms. However, it’s important to note that their current savings rate may not be the highest since they are just beginning to consider retirement and may have less motivation to save compared to older generations.
Retirement serves as an important deadline that compels us to put our affairs in order and be better prepared for the future we envision. Lawrence Sprung, the author of Financial Planning Made Personal, believes that the age group between 45 and 55 tends to have the most realistic expectations for retirement. This group is closer to retirement and can better visualize slowing down or retiring, which can be more challenging for younger age groups. Sprung emphasizes the importance of younger generations understanding and having realistic expectations about retirement from an early stage to facilitate systematic saving.
To determine which generation has the most realistic outlook on retirement, it’s crucial to address unrealistic expectations that can lead to challenges in retirement planning. Understanding the age groups with the most naive expectations allows for targeted intervention before any significant damage occurs. On the other hand, as time passes, individuals naturally become more inclined to consider only viable options as they approach retirement.
Loreen Gilbert, CEO at Wealthwise Financial Services, highlights that the age group between 50 and 60 tends to have the most realistic expectations about retirement. His age group is approaching retirement and has developed a strong commitment to comprehending the necessary steps to achieve their retirement goals. Additionally, they often have more discretionary income than in their younger years when starting their careers.
As you transition into retirement, many of the concerns you have may prove to be exaggerated. Michelle Riiska, a financial planning analyst, emphasizes that the fear of the unknown looms large for those who are younger and further away from retirement. The uncertainty surrounding future events, such as another pandemic, decisions about having children, and where or how to live during retirement, can create anxiety. In contrast, already retired individuals have a smaller timeline to consider, reducing some of those concerns. While they may not have saved as much as they hoped, the shorter time frame allows for easier financial planning as the unknowns are more limited.
Ironically, if channeled correctly, this fear of the unknown can inspire younger generations to stay on track with their savings and secure a comfortable retirement. Understanding the potential challenges and having realistic expectations can motivate individuals to take action early on and develop good financial habits. However, for those who may be behind on their retirement savings, there is always the option of generating extra income through a retirement side hustle. This can provide additional financial security and flexibility during retirement.
In conclusion, the age group with the most realistic expectations about retirement varies depending on factors such as life stage, financial education, and proximity to retirement. The 45-55 age range and individuals between 50 and 60 are often cited as having a better ability to envision retirement and understand the importance of financial preparation. However, younger generations must develop realistic expectations and start saving early to ensure a comfortable retirement. By addressing unrealistic expectations and staying proactive, individuals can navigate the uncertainties of retirement and work towards a financially secure future.