Younger Generations’ Retirement Savings Burdened by Student Loan Debt

An EBRI webinar compared Baby Boomers, Generation Xers and Millennials’ asset ownership, retirement plan access and net worth at the same ages to provide a clear total retirement picture.

Generation X and Millennial retirement plan participants have accumulated larger defined contribution (DC) retirement plan balances than Baby Boomers had at the same age, but younger generations’ savings for retirement are burdened heavily by student loan debt, according to research from the Employee Benefit Research Institute (EBRI).

Craig Copeland, senior research associate at EBRI, presented research that compared the generations on key financial indicators at the same age. Copeland made the comparisons based on access to retirement plans; median defined contribution plan balances; participants’ net worth; participants’ incidences of student loans; their median balances and distribution of debt sources; and income. He presented the research during an EBRI webinar, titled “Comparing the Financial Wellbeing of Baby Boom, Generation X and Millennial Families: How Do the Generations Stack Up?”

“It’s twice as likely for a Generation X family—when they’re 39 to 54—to have a student loan, either for themselves or for their children than it was for the Baby Boom generation when they were 39 to 54 to have a student loan,” Copeland said during the webinar. “That tremendous change is almost universal, the student loan incidence.”

Student Loan Debt

Younger workers are more burdened by student loan debt loads than older generations, EBRI data showed. Generation X workers held $23,000 in median student loan balances, compared with $11,118 for Baby Boomers when they were ages 39 to 54.

“Along with the increased incidence, we can see also the median value that’s being held by these families for these student loans,” Copeland said. “It almost doubles in almost every income quartile except for the highest income quartile.”

Among Generation X workers, many are struggling with saving for retirement. Overall, for Generation X, student loan incidence was 26.1%, and 10.9% for Baby Boomers when they were ages 39 to 54; meanwhile, 42.4% of all Millennials held student loan debt, compared with 23.9% for Generation X at ages 25 to 36.

“Not only is the incidence doubling, but the amount being held for these younger generations is doubling too,” Copeland added.  

Net Worth

Net worth comparisons across generations are useful to provide plan sponsors and retirement plan advisers with a “total retirement picture,” Copeland said.

“When we compare net worth at the median level, it’s actually lower for the younger generation,” he explained. “The retirement plan numbers improve, but when we look at total finances, Generation X is not doing as well at the median as the Baby Boom generation except for the highest income quartile.”

Baby Boomers had accumulated $164,683 in median net worth, compared with $151,050 for Generation X at ages 39 to 64; and, from ages 25 to 36, Generation X had accumulated $32,359, compared with Millennials’ $23,130 median net worth. 

Comparing Generation X and Millennials’ median net worth at ages 25 to 36 shows large demographics saving gaps. For retirement plan advisers and plan sponsors, this could provide a window to explore means to boost African Americans median net worth in retirement plans, as the median net worth for the 25 to 36 age cohort is $1,790 for Black Millennials, compared with $14,021 for Black Generation Xers.

“White families and families with Hispanic heads have higher net worth at the median, but we do see tremendous declines in net worth for families with family heads that are Black,” Copeland said.

Hispanic workers have lagged other groups in retirement savings, previous research showed.

The median net worth for Millennial white non-Hispanics was $56,320, and $46,495 for Generation X white non-Hispanics.   

Retirement Plan Access

Copeland explained that 74.2% of Baby Boomers held assets in a retirement plan at ages 39 to 54, compared with 65.3% for Generation X. However, 50% of Generation X workers have a DC plan, compared with 47.9% of Baby Boomers, the EBRI research showed.

For Millennials, 59.5% have access to a retirement plan at ages 25 to 36, versus 59.1% for Generation X; 46.4% of Millennials held assets in a DC plan, as did 41.7% of Generation Xers.

These figures show that the retirement plan landscape has changed, and DC plans are now more prominent than defined benefit (DB) pensions, Copeland explained.  

“More [older] people had a retirement plan because they had a DB plan where they’re automatically enrolled, compared to the DC plan where we have some people that are eligible that are not participating,” he said.

Additionally, comparing Baby Boomer and Generation Xers’ retirement plan accounts at the same ages by income quartile and overall shows that Generation X retirement plan participants have accumulated $70,000 in median DC balances, compared with $38,987 for Baby Boomers. At the fourth income quartile, Generation X plan participants have accumulated $193,000 in DC plans, compared with Baby Boomers’ $101,366 median account balance.

Generation X’s DC plan balances are higher than Baby Boomers’, both overall, and for “each income quartile in those respective generations except the smallest one [the first quartile], where there was a slight decline,” Copeland said.

Baby Boomers’ median balances in the first quartile are $7,220, versus $6,000 for Generation X.

Copeland also compared Generation X and Millennials’ ownership of assets and debt at ages 25 to 36. Millennials held larger balances overall, $15,000, compared with $11,263 for Generation X.

“The younger generation is doing better than what the older generation did in the DC plan,” Copeland said. “The median values across each income quartile went up for the Millennials relative to Generation X when they were these same ages.”