Here, our head of retirement, Richard Parkin, outlines the discrepancies and explores their impacts on the next generation of retirees – as well as the current one.
With the youngest baby boomers on the cusp of turning 60, the majority appear to have now settled into retirement. It has become a cliché to label them a charmed generation. Yet their retirement fortunes look better, and more straightforward, than the generation succeeding them. However, Generation X may have a more complex path to a prosperous retirement. This could still impact baby boomers, as many have adult children and loved ones facing these retirement woes.
Demographics is not an exact science: older Gen Xers may retain some of the privileges of the boomers. Likewise, younger boomers may face some of the challenges of Gen X.
However, there are clear trends in how retirement paths have evolved across generations.
Working life
Baby boomers tend to have had more stable working lives. For much of their career, ‘jobs for life’ were still available, usually with the security of a defined benefit (DB) pension. (A pension which pays an income based on salary and years worked, rather than amount of money contributed).
Gen X’s careers have been more wandering in nature. They typically have more jobs in their lifetime.1 They are more likely to have periods of self-employment, entrepreneurship and additional education.
Nearly half of all self-employed people in the UK are over 50.2
But Gen X may also have to work longer. The Institute for Fiscal Studies (IFS) has found patterns of employment among people in their 50s and 60s are dramatically different to those seen a few decades ago.3
Furthermore, the UK state pension will kick in far later for Generation X. A woman born in 1946 would have been able to claim her state pension at 60; a woman born in 1976 will have to wait until she is 68.
This is a major concern for many in the Gen X camp. One on the board for the boomers.
67% of respondents in our recent survey of retirement advisers said the current economic environment means some of their clients are likely to have to work longer.4
Score tally: Baby boomers 1 | Generation X 0
Commitments
Boomers were often free to enjoy their wealth: their children did not need the same support as Gen X’s offspring. For example, university education in the UK was largely free until the introduction of tuition fees in 1998.
Additionally, the parents of baby boomers (the Silent Generation born from 1925–1945) may not live (have lived) long enough to require expensive care.
Generation X retirees may have had children later in life. They are also likely to inherit later as their parents live longer and pay care costs for longer. This is why many refer to Gen X as the “sandwich generation”.
As many Gen Xers planning for retirement are supporting both elderly relatives and ‘boomerang’ children (adult children who opt to move back in with their parents) – they may also have more debt. Having bought their homes later and at higher cost, they could still be paying down a mortgage in retirement. Another point for the boomers.
Score tally: Baby boomers 2 | Generation X 0
Disparate wealth
While many UK boomers have healthy workplace pensions, and typically property wealth, Gen X are likely to have more disparate sources of income. These can include property, ISAs, workplace and personal pensions.
Many of this generation entered the workplace just as companies realised they could no longer afford generous, DB pensions. They also didn’t benefit from being automatically enrolled in pensions like Millennials have. Auto-enrolment started in 2012, so it came relatively late into the Gen X working window.
Caught between two regimes, many do not have the same generous pension provision as the previous and following generations. Yet, most Gen Xers have still participated in housing market growth – if they were able to get on the property ladder in the first place.
In the 1980s, it took the average couple in the UK three years to save a house deposit. In 2023, it takes nine.5
Someone who bought a house for £200,000 in 2000, would have an average gain of 235%, raising their house price to around £670,000.6 The boomers score again but Gen X homeowners probably deserve a consolation point.
Score tally: Baby boomers 3 | Generation X 1
Changing family structures
While boomers are more socially progressive than previous generations, the traditional model of a breadwinner with a large workplace pension was still the norm. This is far less likely to be the case for Generation X.
Female participation in the workforce has notably expanded. The female employment rate has risen from 54% in 1983 (when Gen Xers first started to hit the workplace) to over 70% today.7
Households are far more likely to have two people working and contributing to a pension. The percentage of UK households in which the female partner earns more than the male partner has steadily risen from 19.8% in 2004 to 23.3% in 2019.8 This means many households will have two pots of wealth to draw on for retirement.
The Gen X family unit is generally more fluid. But this can create complexity; such as step-families, divorce settlements, multiple properties and challenges around inheritance.
Finally a win for Gen X, even if it comes with complications.
Score tally: Baby boomers 4 | Generation X 2
So, a win for the Boomers overall when it comes to the retirement race. Yet, cross- generation families and friends may view the obstacles facing Gen X as a shared problem.
Building a coherent retirement plan does not need to be faced alone. Financial advisers are often employed to consolidate various income sources and to alleviate some of the headache of planning for life after work. It is clear that while Boomers may be more free to enjoy their retirement, Generation X is likely to need more support than Boomers did – and at an earlier stage!
