Vanguard’s latest retirement outlook was full of interesting observations. Key findings included only four in 10 Americans being on track to maintain their lifestyle in retirement, and younger generations reaping “the benefits of an improving retirement system” compared to Gen X and baby boomers.
According to the annual report (1), 47% of Gen Zers and 42% of millennials say they’re on track for retirement, despite struggling with debt and student loans in particular, and “two key levers” could boost those efforts. As for Gen X and baby boomers, Vanguard claims they have one big opportunity left.
No matter what generation you fall into, are you on the right path?
The two “levers” that Vanguard claims can help younger generations boost their retirement savings are continued expansion of defined contribution (DC) plan access and two additional years of work, which it believes may become the norm for younger generations.
Unlike a traditional pension, DC plans require employees to make their own contributions and investment decisions.
According to Vanguard, Americans who have access to these plans, which include 401(k)s, 403(b)s and 457 plans, are twice as likely to reach their savings goals compared to those without.
“If DC plan access were available to all workers, retirement readiness could increase by 19 percentage points,” the study noted. “Working two years longer — until age 67 — could add another 13 percentage points to readiness.”
While you can start collecting your Social Security retirement benefit at age 62, if you were born in 1960 or later, you won’t receive all of your benefit until you reach the full retirement age (FRA) of 67. If you take your benefit earlier than your FRA, you’ll receive a permanently reduced benefit.
Nearly three in four Americans expect to rely on Social Security in retirement, according to research from Empower. (2) But with an average monthly check of $2,008.31 for retired workers (as of July 2025), that won’t be enough for most Americans to maintain their current lifestyle. (3)
Social Security was never meant to be the sole source of a person’s retirement income: rather, it was part of a three-pronged approach that also includes pensions and personal savings. However, in the private sector, traditional pensions have largely been replaced by DC plans.
Almost two-thirds (63%) of American workers in both the private and public sectors had access to a DC plan in 2023, according to Congress.gov. (4) However, in a typical year, many of them don’t take advantage. In 2023, for example, participation by all workers (full and part-time) was 45%, according to the Congressional Research Service. (5)
Features such as auto-enrolment and higher default savings rates in DC plans can make it easier for workers to save and invest. One study (6) found that more than one-third of large 401(k) plans have automatic enrolment, with nearly 90% offering employer contributions.
And younger generations are in the best position to benefit since they have a longer savings window.
They can also boost their savings by working until age 67 — instead of the traditional retirement age of 65. Only then would they get their full Social Security retirement benefit, which potentially means having an additional two years to invest.
Multiple surveys suggest Gen Zers are prepared to work longer before retiring. According to a survey (7) from insurance company Nationwide, 38% of this generation believes the standard retirement age of 65 is “not relevant to them in today’s economic environment” and about half (48%) of them plan to work beyond 65, pointing to the flexibility of remote work.
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All generations appear to be pushing out their retirement timeline.
Almost half (49%) of middle-class Americans who aren’t yet retired expect to work beyond traditional retirement age, while more than half (52%) plan to continue working even after they retire, according to the Transamerica Center for Retirement Studies. (8)
Meanwhile, Vanguard’s retirement outlook claims only 40% of Gen Xers and baby boomers are on track for retirement. For baby boomers, in particular, all but the top 30% of income earners are expected to “fall short of their spending needs by about 20% of their pre-retirement income.”
Many of them, Vanguard notes, “experienced the switch from defined benefit (DB) to DC plans before the widespread adoption of stronger plan design, which has benefited younger generations.”
For older Americans who won’t have as many years to benefit from auto-enrolment in DC plans or a higher default savings rate, Vanguard points to one key potential solution: tapping into home equity.
According to the investment management company, that could mean downsizing to a smaller home, relocating to an area with a lower cost of living, taking out a reverse mortgage or even selling the house and becoming a renter.
However, Vanguard also notes that these strategies haven’t proven popular as many people are emotionally attached to their homes, and they depend on factors like inflation and the state of the housing market.
Only about 1.36 million older homeowners have taken advantage of reverse mortgages since 1990, according to the National Reverse Mortgage Lenders Association. (9) And only 15% of homeowners aged 60-plus said they would consider using their home’s equity for extra funds needed during retirement, according to Fannie Mae. (10)
If they need to generate additional cash, the most likely action would be to sell their home (33%), followed by taking out a “small lump sum of equity that could be repaid” (31%) or getting a home improvement loan (26%), Fannie Mae’s research found.
Home equity could be used to remodel a house for an older person’s needs. Alternatively, it could also be used to pay for medical expenses, move into a long-term care facility or, for low-income seniors, to help pay for monthly expenses.
Aside from accessing your home’s equity, other ways to strengthen your nest egg include building an emergency fund, taking advantage of employer-sponsored benefit plans (especially if they offer employer-matching), diversifying your investments and possibly looking at long-term care insurance or health savings accounts (HSAs). You could also look into annuities that offer guaranteed income for life.
It’s worth consulting a financial advisor to come up with a long-term plan — no matter which generation you fall into.
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Vanguard (1); Empower (2); Social Security Association (SSA) (3); Congress.gov (4); Congressional Research Service (5); ICI (6); Nationwide (7); Transamerica Center for Retirement Studies (8); National Reverse Mortgage Lenders Association (9); Fannie Mae (10).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.