Nearly half of Americans are on track to achieve retirement security, according to the just-released “Vanguard Retirement Outlook” from the investment management company Vanguard.
Across all income levels, Gen Z and millennials are projected to be better prepared for retirement than baby boomers and Gen X, thanks to broader employer-sponsored defined contribution (DC) plan access and stronger plan design, Vanguard officials said. About 47% of Gen Z and 42% of millennials are on track for retirement.
However, debt burdens — especially student loans — remain a significant challenge for many. Millennials’ debt burden (25% of income) reduces their retirement success probability by nine percentage points to 42%. The financial strain of this debt burden poses a significant challenge for younger individuals trying to save for retirement, while also emphasizing the importance of financial wellness, advice, and emergency savings, company officials added.
The comprehensive analysis uses the Vanguard Retirement Readiness Model (VRRM), which integrates individual factors such as age, income, savings, retirement plan access, and spending goals with simulated wealth projections based on Vanguard’s capital markets model forecasts.
The research evaluates retirement readiness of American workers and shows that access to DC plans remains a critical factor in retirement success. Workers with DC plan access are twice as likely to reach their savings goals compared to those without. If DC plan access were available to all workers, retirement readiness could increase by 19 percentage points, according to the company, and working two years longer—until age 67—could add another 13 percentage points to readiness.
“Expanding access to defined-contribution plans and improving plan design has dramatically improved retirement outcomes,” Fiona Greig, Vanguard’s global head of investor research and policy, as well as co-author of the report, said in a statement. “Our research shows that features like auto-enrollment and higher default saving rates are helping more Americans build retirement wealth.”
Among older generations, the report found that nearly 40% of all baby boomers and Gen X workers are on track for retirement, with higher-income workers substantially better prepared. The median-income baby boomers will be able to replace 56% of their pre-retirement income, with an annual spending shortfall of $9,000, or 24% of their overall spending needs, according to the report. For Gen X, the outcome improves with the median spending shortfall reduced to $6,000 annually, accounting for 18% of their overall retirement spending needs.
While the retirement outlook is enhanced for younger generations, Vanguard officials said that two key levers would lead to greater improvement: continued expansion of DC plan access and two additional years of work, which may become the norm for younger generations. For older generations, tapping into home equity presents an additional opportunity to help close retirement spending gaps and enhance financial security.
“Retirement readiness isn’t just about saving — it’s about having the right tools, support, and access throughout a worker’s career,” added Kelly Hahn, Vanguard’s head of retirement research and co-author of the report. “Retirement security is a shared responsibility. Policymakers, employers, and individuals all have a role to play in building a more resilient future.”
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