1.) 2.) 3.) Baby Boom and Generation X Workers Have More Assets and More Debt Than Current Retirees Had at Similar Ages

Baby Boom and Generation X households headed by individuals aged 25 to  34 have greater accumulated assets, adjusted for inflation, than current  retirees had when they were the same age but they also have more debt. The modest increase in  assets between the Baby Boom and Generation X can be accounted for in  large part by the increase in the ownership and value of DC retirement  accounts, because SCF data do not reflect the value of benefits from DB  pension plans. Generation X and the Baby Boom Are Estimated to Have Similar Levels of Real Retirement Income, but Generation X Could Have Lower Replacement Rates

In our simulations, Generation X and the Baby Boom have similar levels  of retirement income in real terms (adjusted for inflation). Social Security  benefit levels for Generation X and the Baby Boom will depend on how the  Social Security funding shortfall is resolved. The Distribution of Retirement Income Will Vary within Generations, and Certain Groups Will Be More Likely to Have Lower Retirement Incomes

Our simulations suggest that retirement income will vary significantly  within both Generation X and the Baby Boom. Retirement income will also  vary by demographic group, with income being lower for the less educated  and single women. In comparison, married couples in the top 20 percent in terms of Social  Security benefits receive about 31 percent of all Social Security benefits,  while those in the bottom 20 percent receive about 10 percent. The percentage difference between those with pensions and  without pensions is even larger for single persons. Again this is due to lower lifetime earnings and a lower rate of  pension coverage. Appendix I: Scope and Methodology

To gain an understanding of what today’s workers might expect to receive  in terms of retirement income, we compared the wealth of current  workers with that of current retirees, at similar points in their lives, and  estimated the pension and Social Security benefits that the Baby Boom  and Generation X might receive. Analysis of Simulated Retirement Income

To analyze how workers from the Baby Boom and Generation X compare  in terms of the retirement income they can expect to receive and the likely  distribution across workers within the Baby Boom and Generation X, we  simulated expected retirement income at age 62. Social Security: Program’s Role in Helping Ensure Income Adequacy. Social Security Reform: Implications for Private Pensions. Pension Plans: Characteristics of Persons in the Labor Force Without  Pension Coverage.
Why GAO Did This Study

Today's workers will rely to a large extent on Social Security, private pensions, and personal wealth for their retirement income. But some analysts question whether these sources will provide sufficient retirement income to maintain workers' standards of living once they leave the labor force. Indeed, the Social Security trust funds are projected to become exhausted in 2042, at which time, unless action is taken, Social Security will not be able to pay scheduled benefits in full. To gain an understanding of what today's workers might expect to receive in terms of retirement income, GAO was asked to examine (1) how the personal wealth of Baby Boom (born between 1946 and 1964) and Generation X (born between 1965 and 1976) workers compare with what current retirees had at similar ages, (2) how workers from the Baby Boom and Generation X compare in terms of the pension and Social Security benefits they can expect to receive, and (3) the likely distribution of pension and Social Security benefits across workers within the Baby Boom and Generation X.

What GAO Found

Baby Boom and Generation X households headed by an individual aged 25 to 34 have greater accumulated assets, adjusted for inflation, than current retirees had when they were the same age, but also more debt. Most of the large increase in assets between current retirees and the Baby Boom is due to increased ownership and equity in housing. Contributions to defined contribution pension plans play a role in explaining the modest increase in assets between the Baby Boom and Generation X, in part, because GAO's data do not allow it to consider the value of benefits from defined benefit pension plans. Workers from Generation X are estimated to have similar levels of retirement income in real terms (adjusted for inflation) at age 62 as their counterparts in the Baby Boom, but Generation X may be able to replace a smaller percentage of their pre-retirement income. Whether Social Security benefits for Generation X are higher or lower than those for the Baby Boom will depend on how the Social Security funding shortfall is resolved. With regard to pensions, Generation X and the Baby Boom are estimated to have similar levels of pension income even with a continued shift from defined benefit to defined contribution pension coverage. Retirement income will vary within both Generation X and the Baby Boom households, and certain groups will be more likely to have lower retirement incomes. As one might expect, given significant variation in workers' earnings, if households were arrayed from lowest to highest in terms of estimated total retirement income, those in the top 20 percent would receive a substantially larger proportion of income compared with those in the bottom 20 percent. Retirement income is lower for the less educated and single women.