Retirement & Financial Planning Report

Baby boom retirees and the generation immediately following them, called Generation X, are less likely to have enough postretirement income to maintain their preretirement standard of living compared with current retirees, according to a study by the Urban Institute.

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Those generations have some positive factors working for them, including earnings from being relatively more highly educated, plus the impact of a greater rate of women in the workplace earning salaries and building up benefits such as Social Security on their own account, it said. For example, Generation X retirees are almost twice as likely retirees born before the baby boom started in 1946 to be college educated and about a third as likely to be high school dropouts.

Also, they have spent more of their careers eligible for defined contribution retirement savings programs such as the federal TSP.

However, in general those advantages are offset by factors including the reduction in defined benefit retirement plans in the private sector, it said, underscoring the importance to federal employees of having such plans through CSRS and FERS.

In addition, poor investment returns of recent years, and in particular during the 2008 downturn, have reduced the "replacement rate" that those two generations can expect to generate from their savings. Those who in addition lost income due to job loss in the recession were hit even harder, it said.

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"Future retirees are projected to have lower replacement rates, and so their prospects are worse than current retirees in relative terms," it said. For example, the income of a typical Generation X retiree is projected to replace only 84 percent of preretirement earnings—significantly less than the 95 percent replacement rate for the average retiree born during the Great Depression.