No pension, no problem: Goldman Sachs report shows that younger generations are getting more prepared for retirement than older ones

When it comes to retirement savings, Millennials and Gen Zers are on their own, don’t have access to pensions, and have low expectations of relying on Social Security. Ironically, this pessimism may actually help them.

That’s according to a new report from Goldman Sachs Asset Management, which surveyed more than 5,200 working and retired individuals from different generations. The report, which examined various barriers to saving for retirement among Baby Boomers, Generation X, Millennials, and Generation Z, found that younger generations were far more confident in their ability to reach their goals.

About 45% of Generation Xers said they are behind the times when it comes to saving for retirement. With the introduction of 401(k)s, that generation (and the youngest boomers) became the first to save primarily on their own, leading to a lack of savings; Goldman calls them the “401(k) experiment” generation. The report notes that some Generation Xers — the oldest will turn 60 next year — are retiring earlier than expected, not because they have money but because of health or family care needs.

Baby boomers are also not as confident about saving enough for retirement as might be expected given the headlines about their unprecedented wealth. With a current life expectancy of 60 to 78, they report retiring later than the generations before them, a trend that previous research supports. Some simply need to work longer for a paycheck, while others, buoyed by good health and long life expectancy, want to remain in the workforce as long as possible.

“The 401(k) transition poses a huge threat to Gen X and working Baby Boomers, and it has taken a long time for many working Americans to adapt to the new retirement system — some too long,” Goldman’s report states. “Many people may not have a coherent strategy about how much to save, how to invest, and when they can afford to retire.”

A Separate reports A recent study looked at how more than 50% of so-called peak boomers — those who have reached traditional retirement age — have accumulated $250,000 or less, meaning it’s likely they’ll spend whatever assets they’ve accumulated and rely on Social Security. Women of that generation are even worse off than men, with about 30% less in savings, and Hispanic and Black boomers have far less wealth than white retirees.

‘Be careful’

Meanwhile, younger generations are under no illusions that they can rely on outside contributions to shore up their retirement. So they have started saving on their own, and at a younger age than generations before them: Gen Z, born between 1997 and 2012, has been the first generation to start saving on its own. Average retirement savings: $29,000According to Goldman, 68% believe they are on the right track, which is far higher than either Generation X or Boomers.

This is promising news. The report details just how big a difference the first decade of saving can make to a person’s total savings. According to Goldman’s calculations, with a starting salary of $50,000, a 2% pay rise each year, 5% contributions from both employee and employer, and assuming a 6% annual return, saving during the first 10 years of your career could result in 67% more savings than a person who waited longer to invest.

Still, some perspective may be needed. The report once again found that a large portion of Gen Z wants to retire early: 44% said they want to leave the workforce before age 60, and 14% said they plan to retire between 65 and 69. But it’s a goal that could prove difficult in today’s economy — especially given increases in life expectancy that could extend retirement periods by a decade or more.

“Gen Z-ers should keep in mind that if they are underprepared at the beginning of their careers, it may be very difficult for them to advance,” the report said.

‘Financial Vortex’

The oldest Millennials, now approaching middle age, are facing a combination of factors that Goldman calls a “financial vortex”: The combination of student loan payments, credit card debt, childcare costs, buying a home, and caring for elderly parents or family members are cutting into potential retirement savings. (Notably, Gen Z isn’t far behind.)

Still, Millennials remain the generation most confident about their ability to retire: 69% said they are on track or ahead of schedule with their savings, and 43% are confident they will reach their goals, compared to 25% of Generation X and 22% of working Boomers.

That’s impressive for a generation that has faced one financial shock after another, as well as increased costs for necessities like housing and child care. Recent research from the Federal Reserve found that millennials—at least the richest ones—are making significant gains in wealth accumulation.

In some cases, it’s been easier for some of them, points out Chris Seder, senior retirement strategist at Goldman Sachs Asset Management: They’ve learned from older generations, but they also have more and better options for saving for retirement, such as automatic enrollment. Luck,

“These generations are more actively planning for their retirement and taking advantage of the resources available to them,” Cedar said.

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