When the nation’s economy close to tanked five years ago, 60-somethings who lost a share of wealth in the downturn panicked, worried they were out of time to recoup. But a recent study shows that Baby Boomers are actually in pretty good shape – they’ve recovered most of their earnings thanks to some cushion afforded from back in the dot-com era. Gen X and even younger boomers, on the other hand, have had a tough time recuperating from the Great Recession.
The report by The Pew Charitable Trusts, Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?, looks at the savings of five generations before the economic collapse of 2008. It examines how losses inflicted by the recession took a toll on retirement savings by calculating replacement rates. In other words, how much yearly income do households have on hand to spend post-retirement?
Pew researchers find that those born between 1956 and 1955 “may be the last group on track to retire with enough savings to maintain financial security through their golden years.”
“Late boomers and Generation-Xers lost significant amounts of wealth during the Great Recession, eroding their already low levels of assets,” says Erin Currier, head of Pew’s economic mobility project, in a press release blasted out last week. “As policymakers focus on Americans’ retirement security, particular consideration should be paid to how younger generations of workers can make up for these losses and prepare for the future.”
More key findings from the study:
- Boomers born before 1955 have a better financial standing than those born during WWII. The dot-com boom really set them up for success, giving them, overall, higher net worth and home equity than generations before and after.
- Boomers and Gen-Xers have lower asset-to-debt ratios than their older counterparts. While Depression and WWII babies have been shrinking their debt, boomers and Gen-Xers have been adding more. As of a few years ago, asset levels for war babies were 27 times greater than their debt. Later boomers had four times more assets than debt.For Gen-Xers, assets were two times their debts.
- The Great Recession hurt everyone, but especially Gen X. Boomers felt the loss just before they were set to retire, losing up to 28 percent of their median net worth. But Gen X lost 45 percent.
- Replacement rates look promising for boomers, but pretty depressing for their younger counterparts. Boomers may well be the last generation for a while to retire with enough cash to support themselves.
While the study gives Gen X plenty to worry about, we can infer greater uncertainty for Millennials, as CNN Money points out.
“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,” writes Nin-Hai Tseng. “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.”
Better start saving up that nest egg, young people.
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