Are You Prepared for Retirement? A Clear Comparison of Generational Savings Habits

When you think of retirement readiness, you might assume older generations are in the lead. However, 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, facing significant savings shortfalls and a limited time to catch up.

Understanding where they fall short and how younger generations are pulling ahead can help you assess your own retirement strategy and make smarter financial decisions.

Why Are Baby Boomers Are Less Prepared for Retirement Than Younger Generations?

Vanguard’s 2025 Retirement Outlook reveals a generational divide in retirement preparedness. While nearly half (47%) of Gen Zers and 42% of millennials are on track to maintain their lifestyle and spending habits in retirement, only about 40% of baby boomers and Gen X 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) plans, like 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-escalation, and 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) plans, like pensions, have 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 savings, they should make sure they have a handle on their debt. High-interest debt, especially, can erode any of the 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 Garland, CFP at WealthClarity. “It’s a costly cycle that undermines their progress and leaves them even further behind.”

Here are a few steps boomers can take to better 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.