Retirement has evolved over the decades - from lifestyles to incomes. For instance, the way baby boomers live in retirement is very different from the way earlier generations did. Fast forward to current working generations, and you'll find the way millennials and Gen Xers save for retirement has drastically changed from the way the boomers and earlier generations planned.
5 retirement trends we've seen change
Over the past few decades, various trends have shaped the way people work, live and think about retirement. Here are five retirement trends we've watched unfold.
- People are working longer
Life expectancy rates have steadily risen over the decades. Generations ago, people retired in their 50s and the stereotype showed retirees quietly living in quiet areas. This is not so much the case today, as people live longer, want to be in urban locations and are working longer, which means more money needs to be put aside for retirement years.
- Social Security isn't a full income
Social Security was never intended to serve as a primary income for retirees. However, that wasn't how it played out. The numbers indicate Social Security makes up a large proportion of monthly income for 61 percent of beneficiaries, with a full third of them relying on it for 90 percent or more of their income.
Yet, the average benefit ($1,371) is typically not enough to cover today's monthly expenses.
- Employer-sponsored pensions have dwindled
Employer-sponsored pension plans continue to creep towards extinction. As of 2017, just 23 percent of all workers (private and public sectors) participated in a pension plan. These numbers are likely to continue to dwindle until they fade away completely.
- Retirees are more stressed
Trends have shifted to where people now manage their own money post-retirement, whereas previous generations relied upon Social Security and employer-sponsored pension plans. Health care wasn't a primary worry.
Nowadays, people are concerned with how their 401(k) plans are doing, with some of them "glued" to watching their balances on a daily basis.
- Retirees are more active
Modern retirees live a different lifestyle than previous generations. Between longer life expectancy, preventative health care and better treatments, people are healthier as they reach retirement age and, as a result, tend to live active lives.
While trends have changed, what hasn't changed is the need to have a steady and reliable income to support current expenses and lifestyles.
Retirement income: Then versus now
Years ago, when baby boomers and earlier generations graduated high school or college, they looked for a job. Not too different from today. However, once they landed their job, they tended to remain at one company until retirement, receiving a nice pension at the end of their careers.
Today, the scenario is very different. Our economy, job market and retirement structures have changed a lot.
- Employers have shifted the burden of retirement financing to workers, including health care.
- Job-hopping is the norm with the average worker staying at a company for about four years.
- The "gig economy" continues to grow exponentially.
- Social Security and Medicare plans are likely to evolve, which means everyone needs to plan differently.
These trends have a high potential to contribute to a lack of future financial instability without proper planning. As it currently stands, more than half of millennials have nothing saved for retirement.
How you should plan for retirement
Trends indicate boomers are retiring with fewer savings than their parents did (much is attributed to the housing crisis), but they aren't the only ones struggling. According to statistics, 34 percent of millennials reported that high debt complicates their ability to manage their finances.
Current debt levels will undoubtedly affect retirement incomes. While it's easy to get caught up in the present, now is the time for everyone, from boomers to Gen Z, to get on track and plan for the future.
- Pay down debt with an eye on saving towards retirement.
- Start to "catch up" on retirement savings.
- Rethink spending habits and shift some of the budget towards retirement savings.
- Go beyond the standard "4 percent rule" when it comes to retirement planning.
Everyone should plan for financial freedom in their retirement years. The key is to start early to enable your money to be put to work to yield the best growth.
Whether you're just getting your savings started, are nearing, or already in retirement, GuidedChoice offers a range of retirement solutions that can be personalized to suit your needs. Transparency is important to us, which means our solutions come with low fees and absolutely no hidden costs.
To learn more about how we can help you achieve your retirement goals, ask your employer if GuidedChoice is offered through your employer benefits program.