Personal Finance

Saving for retirement depends on whether you listen to The Beatles or Bon Jovi

Key Points
  • Preparing for retirement looks for different for baby boomers than it does millenials.
  • A new report from the Wells Fargo Investment Institute, titled "Reimagining Retirement," offers tips on how the different generations can be able to comfortably exit the workforce.

How you should prepare for retirement has a lot to do with whether you grew up listening to The Beatles or Bon Jovi.

Experts say you'll typically need at least $1 million saved for retirement, and sometimes more. A new report from the Wells Fargo Investment Institute, titled "Reimagining Retirement," offers tips to the different generations on how they might each reach their savings goals.

Millennials, less likely to have a traditional pension than baby boomers, need to develop financial discipline. Members of Generation X, finding themselves in their peak earning years, need to ramp up their savings right now.

"The different generations have different expectations for how they're going to fund their retirement, and different ways they're saving their money," said Veronica Willis, an investment strategy analyst at the Wells Fargo Investment Institute.

Baby boomers

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More than 10,000 baby boomers turn 65 every day, and many of them (63%) fear they'll outlive their savings. Here are some tips for boomers to consider:

• Delay claiming Social Security. Almost 40% of boomers assume Social Security will be their primary source of income in retirement, while just 15% of millennials say the same, Wells Fargo found.

That makes it particularly important for the older generation members to secure the largest check they can, and that typically means waiting to claim. Your monthly check can be up to three-quarters larger if you file at 70 instead of 62. (There are some cases, however, in which it makes sense to tap your benefits earlier.)

• Consider moving to a lower-cost location. There's no shortage of best places to retire rankings, with lists of spots in the U.S. and abroad. The number of Americans retiring outside the country is up 17% between 2010 and 2015.

• Consider part-time employment or self-employment. "We're seeing entrepreneurship increase a lot among baby boomers," Willis said. In addition to generating more income, putting in some hours at a job may also help you manage health-care costs. One recent study found that half of companies offered full-time and part-time workers the same health insurance coverage.

• Revisit asset allocation. The average life span has grown to 81 for women and 77 for men, from 48 and 46, respectively, in 1900.

That means many baby boomers might want to stay in the market longer, Willis said.

"An all-fixed income portfolio may not be appropriate now that lifespans are longer," she said.

Generation X

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Members of Gen X are figuring out ways to send their children to college and take care of aging parents, Willis said.

"Sometimes they may neglect their own retirement savings," she said.

On the upside, Gen X members, who are in or approaching their 50s, are likely in their peak earning years. They can:

• Design a budget and stick with it. Paying off a mortgage and student debt can help make your retirement more comfortable.

• Don't over-borrow for children. As college costs rise, more students are hitting the federal student loan limits with a portion of their bill unpaid. Increasingly, their parents are borrowing to make up the difference. Parents should be reluctant to take on more debt than they can handle.

"You can't take out a loan to fund your retirement savings," Willis said.

• Take advantage of company retirement plans. Work toward contributing the maximum allowed, and avoid borrowing from the accounts. (After age 50, you can also make additional contributions to tax-deferred accounts such as individual retirement accounts and 401(k) plans.)


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The Great Recession has left many millennials still wary of the stock market, Willis said.

Nearly a third of generation members are taking a more conservative investing approach than experts recommend, and that could make their savings languish, a recent Wells Fargo study found. Ideas for millennials include:

• Start saving as early as possible. If you start investing $5,000 a year at age 45, you'd have $338,000 when you reach 70 (assuming a 7% annual return). If you start doing this a decade earlier, at 35, you'd have $740,000. If you kicked off the routine at 25? You'd have more than $1.5 million.

• Take advantage of your 401(k) at work. Invest at least up to the employer match.

• Keep your retirement savings when changing jobs. You may be able to roll your account into an IRA, or you can move it to your new employer.

• Don't wait until you've paid off your student loans to start saving.

"Take what you have that's extra and put it toward your retirement," Willis said.

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