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Sounds pretty good, doesnt it?
Unfortunately, pensions are few and far between in 2024.
This means that the next generations ofretirees will need to plan differently.
What Happened to Pensions?
If employers wanted to offer their employees retirement benefits, they needed to fund a pension.
Today, 15% of private employers still have pensions in place.
In fact, it may be the opposite.
However, only one-third of millennials have awritten retirement plan.
Many Gen Xers were the first generation to see the elimination of pensions.
How are they doing?
Less than a quarter of Gen Xers feel very confident they will be able to retire fully.
Going forward, Gen X and millennials will need to use afew key strategieswhen working toward retirement goals.
Retirement savings in a 401(k) are generally comprised of employer and employee contributions.
For example, a company might choose to match 3% of your compensation.
These plans are also portable, meaning employees can take their retirement savings with them when they change jobs.
IRAs
Individual retirement accountswere created in 1974 to help employees without pensions save for retirement.
Their popularity began to grow after the introduction of the 401(k).
To this day, IRAs are a common retirement planning strategy used bymillennials and Gen Xers.
From 2016 to 2022, the use of Roth IRAs grew from 6.6% to 19.2%.
Today, many millennials and Gen Xers hold funds in ataxable brokerage accountthrough platforms like Charles Schwab and Fidelity.
The median new home price in 1983 was $75,300.
Jump to 2023, and the median home price is $416,100.
This requires millennials to be creative with housing, and concepts like house hacking are gaining popularity.
The Bottom Line
The elimination of pensions undoubtedly impacts millennials and Gen Xers.
Nevertheless, retirement doesnt have to be a lofty dream.
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