Although most Americans still share concerns about retirement—including nearly two-thirds (63 percent) who fear running out of money in retirement more than death—baby boomers are finally showing signs of optimism about their retirement readiness, according to the new Generations Ahead Study* from Allianz Life Insurance Company of North America (Allianz Life®). More than seven in 10 boomers (72 percent) said they feel financially prepared for retirement, an increase of almost 15 percent from 2010. In addition, less than one-third of boomers (32 percent) said uncertainty about their financial future makes it difficult to know when they can stop working, an improvement from 2010 when half (50 percent) said they were unsure about when they could retire, if ever.
Allianz Life’s study of 3,000 Americans – including 1,000 baby boomers (ages 52-70), 1,000 Gen Xers (ages 37-51) and 1,000 millennials (ages 20-36) – also found that fewer boomers today think it is “impossible” to determine retirement expenses (50 percent, down from 60 percent in 2014) and fewer believe they lack the tools to figure out the retirement puzzle (36 percent, down from 46 percent in 2014).
“The Generations Ahead Study highlights encouraging news for boomers and proves that, with proper focus and engagement, anyone can turn around a poor savings situation and start building for a successful retirement,” said Paul Kelash, vice president of Consumer Insights for Allianz Life. “Whether taking lessons from the past or forging a new path, the key for each generation is to recognize that a solid retirement plan doesn’t happen by chance, but rather with a clear process and defined actions.”
A new frugality has taken hold with baby boomers that is leading to a stronger sense of financial preparedness and confidence than seen in previous Allianz Life studies. With 64 percent of boomers noting themselves as “savers” rather than “spenders,” and 61 percent saying they always know exactly how much money is in their accounts, the formerly free-spending boomers of the “Me” generation have embraced the financial habits of their Depression-era parents —so much so that a full quarter of boomers now describe themselves as “penny pinchers.”
These traits have more boomers thinking seriously about saving for retirement, with nearly two-thirds (65 percent) saying they see it as a basic necessity like food or housing (versus 58 percent millennials and 53 percent Gen X). This new frugal mindset has also contributed positively to their bottom line, with boomers having the highest median amount in retirement savings among all three generations at $175,000, and a full third of boomers saying they have $250,000 or more earmarked for life after work.
Millennials Surpassing Gen X in Retirement Readiness
Interestingly, the other generation finding the most savings success is not the next in line. While Generation X continues to struggle with saving and spending, millennials—although not without their own unique financial challenges—seem better positioned for retirement than their closest predecessors. Median retirement savings for Gen X is only $35,000, the same median amount as millennials, despite Gen Xers being much closer to retirement. As a result, millennials more closely mirror boomers in feeling prepared for retirement (74 percent millennials, 72 percent boomers) and having confidence their income will last a lifetime (76 percent millennials, 67 percent boomers)—while Gen Xers are clearly feeling more vulnerable (63 percent and 58 percent, respectively).
Despite the strong positive attitudes millennials have on being prepared for retirement, they also exhibit some worrying behaviors. While boomers are proud of their newfound saver status, millennials like to spend, with the majority (63 percent) claiming to be “spenders” and nearly one in five (17 percent) admitting they spend money “as soon as I get it” (versus only six percent of boomers). Half of all millennials also say they spend more on going out than they do on rent or mortgage (versus 16 percent of boomers).
New Strategies, Lessons Learned
Despite these financial challenges, new savings strategies and a desire to avoid repeating the mistakes their parents made have had a positive effect on millennials’ retirement readiness. Although largely eschewed by boomers, millennials have embraced online apps to help manage money and/or track spending (70 percent versus 24 percent of boomers). And where technology fails, more millennials are happy to use traditional money management methods like a notebook or planner to manage expenses (63 percent versus 28 percent of boomers). Millennials are also more than twice as likely as boomers to set up “tricks,” such as setting up different accounts for different goals, to get themselves to save money (71 percent versus 32 percent of boomers).
Millennials’ more proactive approach with money management is driven by a belief that their parents made financial mistakes and they can do better. Two-thirds (66 percent) of millennials say they are “much better with money” than their parents were and a similar amount (65 percent) say they are uncomfortable with debt because they saw their parents struggle with it. The end result: Millennials have the most confidence of any generation that they’ll be able to fund their life goals (78 percent versus 67 percent boomers and 64 percent Gen X) with one quarter even feeling “extremely confident” they’ll be successful. “Although generations share similar hopes and fears for the future, the fact that they all approach retirement in different ways is testament to the need for more tailored planning that can address both the positives and negatives inherent in each group,” concluded Kelash.
For more information on the Generations Ahead Study, visit www.AllianzLife.com/GenerationsAhead.
Allianz Life Insurance Company of North America, one of FORTUNE’s 100 Best Companies to Work For in 2017, has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income and protection goals with a variety of annuities and life insurance products. In 2015, Allianz Life provided a total of $2.6 billion in benefit payments that supported policyholders’ financial objectives. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with 142,000 employees in more than 70 countries worldwide. More than 85 million private and corporate customers rely on Allianz knowledge, global reach, and capital strength to help them make the most of financial opportunities.
*The Allianz Generations Ahead Study was conducted by Larson Research + Strategy via online survey in May, 2017 with 3,006 U.S. adults ages 20-70 with a minimum household income of $30K+ and was commissioned by Allianz Life.