How have Americans evolved when it comes to saving for retirement?

How have Americans evolved when it comes to saving for retirement?


There are currently five generations employed in today’s workforce—more than ever before. The Silent Generation, Baby Boomers, Gen Xers, Millennials, and Gen Zers are all sharing space in the labor force today, with over 160,000,000 Americans currently employed [1].

We’ve come a long way since the days of child labor, unsafe working conditions, and 12-hour work days—all part of the labor landscape at the turn of the 20th century. We’ve even come a long way since the Silent Generation entered the workforce decades ago thanks to advancing technology, better employee benefits, higher education levels, and more specialized workers.

The workforce as we know it has evolved tremendously in a short period of time—employees now enjoy benefits like paid holidays, vacation and sick time, 40-hour work weeks, and much more. And with the establishment of employee benefits like company pensions and 401(k) savings plans, our lives after we leave the workforce are evolving as well. As a nation, we have a lot to celebrate! With all of these positive changes and this forward momentum, how has the way we think about saving for retirement evolved?

How Americans have changed the way they save for retirement

If you’ve ever heard a Boomer or maybe even a Gen Xer talk about the pension they’ll be receiving upon retirement, you’re not alone. Defined Benefits (DB) plans used to reign king in the retirement landscape, but the Social Security administration recently reported that the percentage of workers covered by a DB pension plan has been steadily declining for the past 25 years [2]. Instead, American employers are moving towards Defined Contribution (DC) plans, like a 401(k) or IRA.

The differences between DC plans and DB plans are stark—coverage rates, timing of accruals, investment and labor market risks, forms of payout, and labor mobility are all drastically different between the two. That’s not even to mention the difference in responsibility. DB plans are tied to the employer, who is responsible for ensuring employees receive their pension payouts. DC plans, however, are owned by the individual employee—moving the responsibility of each individual’s financially-secure future out of the employer’s hands and into the employee’s.

Even so, half of America’s private sector workforce isn’t covered by an employer-sponsored retirement savings plan. Their retirement will instead be funded by Social Security benefits—which were never intended to entirely replace income in retirement—and whatever they’ve managed to save on their own. The other half will supplement their Social Security benefits with employer-sponsored savings options like a traditional pension or a 401(k) investment plan.

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As you can see, we’ve come a long way since the 1870’s when it comes to preparing for retirement. But we still have a long way to go. Let’s start the conversation about how you can prepare for a financially secure retirement. Give us a call at 800.236.7400 today!