Generational Savings: Future Proof Your Finances

Less than half (42%) of Americans are on track for retirement, according to Vanguard research. Of all the generations, baby boomers are among the least prepared: just 40% are on track to maintain their lifestyle in retirement. Gen X (41%) and millennials (42%) are close behind. Gen Z (47%) is slightly more prepared.

Understanding how you stack up against others in your generation can help you assess your own retirement strategy and make smarter financial decisions.

Older Generations Are Less Prepared for Retirement Than Gen Z

Vanguard’s 2025 Retirement Outlook reveals a slight generational divide in retirement preparedness. While nearly half (47%) of Gen Zers are on track to maintain their spending habits in retirement, only 40% of baby boomers, 41% of Gen Xers, and 42% of millennials find themselves in a similar position.

The outlook for baby boomers is particularly concerning. For median-income boomers, or those earning $56,000 annually, retirement savings are projected to replace just 56% of pre-retirement income, leaving an annual shortfall of $9,000.

Many boomers are less equipped for retirement than younger generations due to retirement plan access and design. According to researchers at Vanguard, Baby Boomers may have missed out on key changes to defined contribution (DC) planslike 401(k)s, that occurred in the mid-2000s.

“Many baby boomers entered the workforce before the widespread adoption of modern defined contribution (DC) plan features—like auto-enrollment, auto-escalationand qualified default investment alternatives—which became common only after the Pension Protection Act of 2006. As a result, they missed key opportunities to build retirement savings during their prime earning years,” the authors of the Vanguard report wrote in an email to Investopedia.

Additionally, as defined benefit (DB) planslike pensionshave fallen out of fashion in the past few decades, DC plans gained popularity and younger generations have benefited more from increased access to these plans compared with older ones.

How Baby Boomers Can Better Prepare for Retirement

The window for baby boomers to save is quickly closing. With less time to take advantage of retirement plans and fewer working years ahead, it’s more difficult to make up for missed savings. This time constraint is a key factor in their lower retirement readiness.

Although it’s harder to catch up later, baby boomers can still take meaningful steps to improve retirement readiness.

“With fewer years to catch up, we have to focus on continuing to work, earning, and contributing to 401(k)s,” said Catherine Valega, certified financial planner (CFP)chartered alternative investment analyst, and enrolled agent at Green Bee Advisory.

But before baby boomers work on boosting their retirement savingsthey should make sure they have a handle on their debt. High-interest debt, like credit card debt, can quickly cancel out any returns they accrue through investing.

“One concerning trend I see with new clients is the accrual of high-interest credit card debt in an effort to ‘catch up’ on retirement savings. Unfortunately, many late savers are unintentionally trading a modest, long-term return on their investments for a credit card interest rate that can easily exceed 20%,” said Annie GarlandCFP at WealthClarity. “It’s a costly cycle that undermines their progress and leaves them even further behind.”

Steps to Better Prepare for Retirement

Here’s what you can do to prepare for retirement.

• Maximize savings: Take advantage of catch-up contributions to 401(k)s and individual retirement accounts (IRAs), and increase savings rates during peak earning years.
• Work longer: Delaying retirement, even by two or three years, gives you more time to save and reduces the need to tap into your retirement savings early.
• Delay Social Security: If possible, wait to claim Social Security. You’ll earn delayed retirement credits each month you wait to claim benefits, up to age 70, which can help you maximize your monthly income.
• Tap into home equity. For older adults facing a retirement income gap, home equity can be a valuable resource. Options include downsizing to a smaller home, relocating to a lower-cost area, selling and renting, or using a reverse mortgage to convert equity into income. This allows you to avoid taking on debt to make up for the shortfall, which is a route that some unfortunately take.
• Adjust your lifestyle before and during retirement. Reducing expected retirement spending by just 13% could put nearly half of Americans on track for a financially secure retirement. Many can make this adjustment without it having a significant on their quality of life. Focus on trimming small discretionary expenses, like dining out or subscription services.