Don't Worry About Today's Retirees: Boomers Are Fine, (but Gen X Isn't)

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When the nation's financial system almost crashed back in 2008, it's easy to see why anyone approaching retirement would have panicked. They saw their lifelong savings plummet as home and stock prices spiraled. For 60-somethings, it seemed there wouldn't be enough time to make up all their losses.

As it turns out, today's retirees have it better than generations before them, according to a new report. Baby boomers lost big when the housing bubble went bust, but they also gained big during the dotcom and housing bubbles of the early to mid 2000s. And so oddly enough, this gave them a decent cushion to comfortably kiss their days working full-time goodbye.

These boomers, or those born between 1946 and 1955, may be the last group on track with enough retirement savings to last them through their golden years, according to a report released Thursday by Pew Charitable Trusts, a Washington D.C.-based public policy think tank.

They are retiring with a bigger nest egg than those born around the Great Depression between 1926 and 1935, as well as the generation born around World War II between 1936 and 1945, according to Pew. What's more, they are better off today than Gen-Xers or today's 40-somethings born between 1966 and 1975.

Pew's study looked at how the Great Recession affected the wealth and retirement plans of baby boomers, compared with Americans younger and older than them. It divided the baby-boom generation into two groups: early boomers, who were born between 1946 and 1955 and late boomers, who were born between 1956 and 1965. While early boomers may be retiring comfortably, late boomers will struggle.

Before the economic downturn in December 2007, early boomers had more savings than generations before them. By the time they approached retirement in their late fifties and sixties, their median wealth was just over $241,000. By contrast, war babies when they were at those ages had $170,604, and Depression babies had $162,222.

What's interesting is that boomers weren't always on track to retire with more savings. In their forties and fifties, war babies had higher median wealth, $156,521, than boomers with $131,761. The difference is that during the dotcom and housing expansions, boomers between their forties and sixties saw their assets grow by 83%. By contrast, war babies saw only 9% growth between the same ages a decade earlier.

While that's good news for today's retirees, the next generations face less certain futures.

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Over the past two decades, Depression and war babies have been shedding debt while boomers and Gen-Xers have been accumulating it. Everyone lost money during the Great Recession, but Gen-X took the hardest hit. Boomers may have lost 28% of their median net worth, but Gen-Xers, who had less time to build their savings, lost nearly half (45%) of their wealth or about $33,000.

True, this generation has a few more years to rebuild their savings, but they likely won't be able to replace their income as well as as boomers have. Going by the theory that people should have enough savings and wealth to replace at least 70% of their income in retirement, Gen-Xers are in a rough spot. Late boomers are on track to replace nearly 70% to 80% of their income in retirement. By contrast, Gen-Xers, at the median, are expected to replace only about half of their income in retirement.

As Pew notes, all this gives policymakers more reason to pay special attention to the obstacles that today's 40-somethings face as they head into retirement.

What's also worth noting is that if Gen X faces so much uncertainty in their golden years, millennials born in the 1980s and 1990s may have it worse if the job market doesn't turn around soon. Many started their careers after the bust of the dotcom and housing bubbles and barely, if at all, benefited from those good old days. Many also entered the early part of their working years during one of history's deepest recessions. True they have many more working years ahead of them, but studies have shown that spells of joblessness early on could have lasting negative impacts on future earnings and employment.

In recent years, ownership of homes and stocks, which have historically made up the bulk of American wealth, has steadily declined. If the trend continues years from now, it's worth watching how millennials will fare as they approach retirement, particularly as the future of social security becomes even less certain.

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