Hahn: The look of retirement changes with each generation

The definition of “retirement” is changing. Retirement used to be when the company you were employed with for most of your life, gave you a gold watch, a party and a pension, generally at age 65.

This evolved to “an objective age at which one can exit the workforce, begin collecting Social Security benefits and have the ability to access retirement savings without penalties.” The concept of retirement changes across generations and is individually unique based on a person’s goals, temperament, health, and financial situation.

The Silent Generation (born between 1925 and 1945)

The Silent Generation makes up a minuscule part of the workforce and were not included in a recent Transamerica study. They are probably the last generation that will be covered by a pension and enjoy strong Social Security benefits.

This generation entered retirement confident that they would have enough money to live comfortably until age 85. Their retirement comfort was challenged by unexpected longevity and skyrocketing health care costs. Many also lacked safeguards against overspending.

Baby Boomers (born 1946-1964)

Baby Boomers are a split generation. The oldest are in their 70’s and the youngest are just now transitioning into or quickly approaching their retirement window.

Their expectations of retirement were enjoying activities that promoted relaxation and happiness. The combined impact of the 2008 financial crisis and COVID-19 means that many Boomers are facing financial hardship in retirement. While a significant percentage of those still in the workforce say they are planning to retire by age 68, many will probably have to work well beyond that age.

Generation X (born 1965-1980)

Gen Xers are at the peak of their earning years, with anywhere from 15-30 years until retirement. They say they are looking forward to engaging in pleasurable activities and “the pursuit of happiness.

While they have a dream of retirement, 69% are worried the money they have saved won’t be enough when they are ready to retire. This “sandwich generation” is likely contending with the expenses of college-aged children and aging parents.

Millennials (born 1981-1996)

For the largest of the workplace generations, the pressure of “getting settled—buying a home, marriage, kids, or professional development—can create conflict with retirement readiness.” The 2008 recession, COVID-19 and an average of $33,000 in student debt have made this group more likely to take a loan against their retirement than previous generations. About 43% say they would like to retire before age 65, because they associate retirement with “getting old.”

Generation Z (Born 1997 and later)

This group is just starting their careers and while they are not expecting to retire, they have started saving. They too associate retirement with aging and getting old and are concerned with being bored in retirement. They are the least likely to plan for Social Security to be a part of their retirement income. They also believe that crypto currencies will be a big part of their retirement planning.

Retirement expectations across generations evolve. One thing they have in common is a desire for more freedom. How they will use that freedom may vary. Another common trend is that adults are not confident in their understanding of retirement planning and are worried about the financial aspects of retirement.

For the Boomers, a retirement crisis is coming. They do not have the time to recover from recent financial setbacks and many will experience a lower standard of living.

The younger generations have time, but it takes a commitment to living within your means and saving for the future.

For individuals making a middle-class wage or above, following a simple 50/30/20 rule is a good start. “Divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and socking away 20% to savings.” The key is planning for the future and being flexible along the way.

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Hahn is a certified financial planner and owner of WWA Planning and Investments in Columbus. She can be reached at 812-379-1120 or jalene@wwafp.com.