The Time Has Come to Give Baby Boomers Some Credit for Their Retirement Preparedness

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When it comes to retirement preparedness, baby boomers (defined as people born between 1946 and 1964) typically get a bad rap.

Quite a few baby boomers were chased from the stock market when it tumbled during the Great Recession and were far too fearful to jump back in, leaving some in worse financial shape than they were a decade ago. Boomers are also planning to be fairly reliant on Social Security when they retire. Though the program has been paying out benefits for more than 75 years, and it'll continue to do so for generations to come, Social Security benefits could be subject to a cut in less than 20 years due to changing demographics (increased life expectancies and a falling worker-to-beneficiary ratio). Any cut in Social Security income could prove devastating to boomers who haven't saved much for retirement.

It's time to give baby boomers some credit

Yet for all the finger-pointing and the evidence that baby boomers are ill-prepared for retirement, new data suggests that in certain retirement categories they're leading the pack in relation to Generation X and millennials. Baby boomers deserve some recognition for their retirement preparedness efforts, and they're going to get it today.

The latest data comes from the Transamerica Center for Retirement Studies and its "17th Annual Transamerica Retirement Survey of Workers." The online worker survey was completed in April and May of this year and featured responses from 4,161 workers. While not an even split, there was a pretty representative sampling of millennials, Gen Xers, and baby boomers who were questioned. Here are some of the ways baby boomers truly stood out.

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1. A leader in 401(k) participation and annual salary saved

The employer-sponsored 401(k) is the most popular retirement plan in the country, with data from the Federal Reserve at the midpoint of 2013 showing that $4.5 trillion in assets was under management in 401(k) plans. It's not hard to see why they're so popular, either. They have a very generous $18,000 annual contribution limit for workers aged 49 and under in 2016, and a catch-up contribution of an additional $6,000 (for a limit of $24,000) for workers aged 50 and up, which would comprise the baby boomers.

According to Transamerica's findings, 80% of all baby boomers surveyed participated in their employer-sponsored 401(k) plan, which tied with Generation X and was 8 percentage points higher than millennials. More importantly, though, baby boomers were contributing an average of 10% of their annual salary to their 401(k) compared to just 7% for both Gen Xers and millennials. The implication is that boomers are indeed taking advantage of the catch-up contribution to sock away additional savings prior to retirement, which should be commended.

2. Boomers are the most likely to monitor and manage their retirement savings

How are boomers able to put away so much more into their 401(k)? The catch-up contribution helps without question, but a lot of their savings ability can likely be traced to their superior focus on monitoring and managing their retirement savings.

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Based on survey data, 67% of baby boomers noted that they either "strongly agree" or "somewhat agree" with the following statement, compared to 63% of Gen Xers and 59% of millennials:

"I am currently very involved in monitoring and managing my retirement savings."

As you read on it'll become a bit clearer as to why boomers are doing a better job staying on top of their savings habits and investing for their future.

3. Baby boomers are the most diversified investors

As impressive as the stock market has been over the long run -- historical returns of 7% per year, including dividend reinvestment -- investors are often taught to diversify their investments over multiple asset classes. When it comes to investment diversity, baby boomers are at the head of the pack.

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When respondents were questioned about where their current retirement savings are invested, 49% of baby boomers noted a relatively equal mix of stocks and other assets classes such as bonds, money market accounts, and cash. Comparatively, 44% of Generation X respondents, and just 32% of millennials,were well-diversified. Furthermore, baby boomers were less likely to not be sure where their money was invested compared to millennials and Generation X.

It's encouraging to see boomers remaining at least partially invested in the stock market given rising life expectancies. It's not uncommon for retirees to live more than two decades beyond their retirement date these days, meaning it's in retirees' best interests to remain invested for the long term.

4. Boomers are the most likely to save for retirement outside of work

In addition to saving through a work-sponsored retirement plan, baby boomers are leading the pack when it comes to saving for retirement outside of work. When respondents were questioned about whether they'd been putting money aside outside of work, 61% of baby boomers responded in the affirmative, compared to 53% of Generation X and 54% of millennials.

I suspect boomers' focus on saving for retirement is confirmation of what we saw in point two above that boomers are doing a better job of monitoring and managing their retirement savings. It also demonstrates a willingness of boomers to be proactive about their own saving habits instead of relying on their employer to coerce them to save for retirement.

5. Most likely to have a retirement budget and have used a retirement calculator

Remember that promise to revisit why baby boomers are doing such a good job at staying on top of their retirement savings? According to Transamerica's broad questionnaire that examined specific retirement strategy components and commonly used sources of information for retirement, boomers have done a substantially better job in key areas than their counterparts from other generations.

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For example, in terms of retirement strategy, 58% of boomers have created a retirement budget that factors in basic living expenses, 57% have accounted for expected healthcare costs, and 44% have a plan to ensure that their savings last throughout their retirement. While there's obvious room for improvement in these numbers, the percentages for Gen Xers and millennials were far lower in these categories.

Likewise, 35% of boomers admitted to using a financial planner or broker as a retirement planning and investing tool, and 22% have previously used a retirement calculator to determine how much they'd need to comfortably retire. Again, plenty of room for improvement in these figures, but they're notably higher than Generation X or millennials.

Because boomers have taken these steps, they're doing a better job of managing their retirement savings.

6. Boomers have been proactive about remaining in the workforce

Finally, baby boomers deserve credit for being proactive about their options leading up to retirement.

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It's no secret that the Great Recession put a number of baby boomers in a tough position, and many could be tasked with working beyond the normal retirement age of 65 in order to generate income and have potentially full health coverage. According to data from Transamerica, at least 93% of baby boomers have taken at least one proactive step to prepare themselves to work past age 65, while 54% have taken at least two steps. A majority of boomers noted that they were staying healthy so they could work longer if needed, and most were performing well at their current job. About 40% noted that they were keeping their skills up to date, which could ensure that younger labor doesn't take their place.

While there are certain aspects of retirement where baby boomers have fallen short, they deserve credit for leading the pack and setting the example for generations to follow in many other respects.

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Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.

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