Lessons from the failures and successes of Baby Boomers and Gen X could provide valuable insight into how Millennials and Gen Z should plan their retirement.
For some, retirement goal is almost in sight, but for others, it’s barely on the radar. But one thing’s for sure: everyone’s planning retirement differently. The HSBC Quality of Life Report 2024 shows how the Baby Boomers, Generation X, Millennials, and Generation Z make retirement plans. Besides showing current strategies for preparing financially, it also outlines challenges and fears that affect the planning process.
Baby Boomers, who are 60-69 years old, are on track with their retirement goals, with 72 per cent stating they will indeed achieve them. They are the most financially prepared, with 8 of 10 Boomers knowing how much money they need to retire. Retirement for most Baby Boomers is a concrete destination rather than an abstract dream.
Only 3 out of 10 consider that they have fallen short of their retirement expectations, and most have already created provisions for the cost of living and deteriorating health.
Baby Boomers are also more proactive regarding legacy planning, with 45 per cent already putting in place wills so that there can be a peaceful transfer of wealth to the next generation.
Gen X, who deals with both ageing parents and children, suffers greatly from financial stress as they try to care for everyone’s needs and keep track of retirement plans. Sandwiched between the disciplined attitude of the Baby Boomers and the more free-going attitude of the Gen Zs, Gen X’s attitude remains somewhere in the middle.
Seventy-six per cent of affluent Gen X are aware of the amount they need for retirement, which indicates a higher awareness among them.
At 28 to 39 years old, millennials are beginning to feel the pressure to retirement plan but can’t catch up. Student loan debt, the cost of living increasingly out of control, and modest earnings, considerably smaller than those of previous generations at their age, dragged the millennials behind when it comes to building retirement savings. Forty-six per cent of millennials are not on the right financial track to meet their retirement goals.
Gen Z, aged 25 to 27 in the study, is only thinking about retirement, and their approach is distinctly mixed: optimistic and unpreparedness. Seventy-seven per cent of Gen Z respondents admitted uncertainty regarding how much to save for retirement. The study also highlighted that only 29 per cent of the Gen Z population have retirement plans.
This generation believes in the ‘YOLO’ mentality (You Only Live Once), propelling them to enjoy the present. However, this generation is increasingly aware of the need for a financial plan, even though retirement is too far. Nearly half of the Gen Z members believe that they will not be able to achieve their retirement goals, but many believe that having a plan is a good enough stance for now.
Generational differences also exist in their financial motivations. For Baby Boomers, motivation comes from health-related concerns and preserving their standard of living. The Millennials and Gen Z focus their attention on debt remittance and the cost of housing. According to the report, all generations responded similarly regarding the increasing cost of living, with 68 per cent flagging it as a major obstacle to retirement goals.
Every financial plan, just as retirement planning, cannot be the same for everybody. Generations and their respective challenges and opportunities differ, so no standardised approach exists. The baby boomers are disciplined savers with clear financial objectives, while the younger ones do not have a clear idea in a rapidly changing economy.
The preparation gap between generations for retirement points to the importance of financial education and starting planning early. Lessons from the failures and successes of Baby Boomers and Gen X would make the difference in setting the financial future right for Gen Z and Millennials.