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Why Gen Xers are saving more for retirement than boomers

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If the Great Recession had any positive result at all, it’s this: Watching the world’s economy stumble, and entire industries crumble, has inspired most people to get serious about socking money away for retirement, instead of putting off saving or leaving it to chance.

“One outcome of the Great Recession is that we’re seeing meaningful changes in financial behavior, especially in the Gen X age group,” says Celandra Deane-Bess, senior wealth planner for PNC Wealth Management and chair of PNC’s national retirement practice. Her team recently surveyed 1,017 U.S. adults with investable assets of at least $50,000 and found that “the recession was a game changer. One of the hardest things is getting people to change their habits, but there has been a real shift in both spending and saving.”

Gen Xers, defined as people ages 35 to 49, are markedly more likely to be putting more of their current income aside for later than are Baby Boomers, partly because the younger cohort is more scared of running out of money in their golden years. Almost three-quarters (73%) of Gen Xers polled agreed with the statement, “I worry that my savings may not hold out for as long as I live,” while only 55% of Boomers agreed.


That worry is well-founded, partly because Gen X entered the workforce just as defined-contribution plans, especially 401(k)s, were replacing the old defined-benefit pension plans, which have all but vanished. So Boomers may get a smaller payout than they’d be due if the old plans had continued, but at least they’re likely to get something. Partly as a result, 45% of Boomers, vs. 65% of Gen X, agree that “I believe I am solely responsible for my own retirement (no Social Security, employer pension, inheritance, etc.).”

Presidential candidates, take note: The merest hint of any intention to slash Social Security is, now as ever, unlikely to win many votes. Even though Gen Xers seem uneasy about counting on it, 94% of both age groups say they expect those monthly checks to be there when they retire.

Both Gen Xers and Boomers cite health care costs as their biggest retirement worry, and they may be right. “Health care reform has slowed the rate of growth in costs,” notes Deane-Bess. “But those costs are still growing at a faster rate than inflation. Then too, life expectancy is increasing, and the longer you live, the bigger the share of your budget that will have to go to health care.”

That’s one reason Deane-Bess is skeptical of Gen Xers’ intention to retire somewhat earlier (age 63, on average) than Boomers, who mostly plan to hold out until at least age 65. Slightly more than half (51%) of Gen Xers are spending less and saving more than before the downturn, vs. 37% of Boomers who say the same.


Will that behavior continue once the shock of the Great Recession has worn off? Deane-Bess believes it will. The economy went into a tailspin just as many Gen Xers were moving into the prime years of their careers, and “they were young enough that it made a lasting impression. They now see firsthand what it’s like to lose a job, or a home, or both,” she says. “Fear of the unknown is one thing, but fear of the known is even more powerful.”