Young boomers have some advantages over older counterparts

Better 401(k) plans, low interest rates and extra time to save could help younger cohort reach their retirement goals

Dec 2, 2017 @ 6:00 am

By John Waggoner

It's not all bad news for younger boomers. In fact, they have more than a few things going for them:

401(k)s and other workplace savings. Younger boomers are more likely to be automatically enrolled in a 401(k) plan, and those plans are also likely to have auto-escalation provisions that increase the percentage they save every year, said Jack VanDerhei, research director at the Employee Benefit Research Institute. And the default investments in most 401(k) plans are target-date funds, which will put the participant in an age-appropriate portfolio.

Distance from bear markets. Older boomers got smacked with two massive bear markets: the tech wreck of 2000-02 and the Great Recession of 2007-09. "They were relatively young, and assuming they didn't run for the hills and put everything in money funds, they would have gotten the full benefit of the stock recovery two or three years later," Mr. VanDerhei said.

Low rates. While the Great Recession wreaked havoc on the housing market, those who were able to hold onto their homes — or were in the market for one — were able to get long-term mortgages for 3% or less, which is about the closest to free money most people will ever see in their lifetimes.

Time. And, of course, they have many years yet before retirement. The youngest boomers will retire in 2031, 14 years from now. If they want to delay their retirement to age 70, they could have 17 years or more to save. And that, as many planners will tell you, is one area where they can learn from the older members of their cohort. The Great Recession forced many older boomers to push their retirement dates back — and that's one reason they are in decent shape for retirement now, said Ted Mitchell, Fidelity's director of public relations for personal, workplace and institutional services. Adding a few extra years of work not only increases personal savings, but boosts a client's Social Security payout. One other benefit: "If you retire later, you have fewer years in retirement," he said.

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