Wells Fargo Offers Distinct Approaches for Millennials, Gen Xers, Baby Boomers Who Are Preparing for Retirement

Guidance aimed at maximizing savings, controlling costs, confronting
fears as U.S. workers are living longer and will need to fund at least a
15-20-year retirement

ST. LOUIS–(BUSINESS WIRE)–Aspiring retirees confront many of the same challenges, including how to
make their savings last throughout retirement. But they can fine-tune
their planning based on the distinct characteristics of the life stage
they’re in, according to “Reimagining
Retirement: Generational Strategies for 21st Century
Challenges
,” a new report from Wells
Fargo Investment Institute
(WFII).

Workers should plan to save at least 15 to 20 years of retirement
expenses because they are living longer, healthier lives. But, “How can
I fully fund retirement?” is a question that plagues even the best
planners, as 40% of U.S. workers indicate they will either need to work
longer or lower their costs of living to help meet their expenses1.
“Costs, such as out-of-pocket spending on health care, are rising at a
faster clip than retirement income,” said Tracie
McMillion
, head of global asset allocation strategy for WFII and an
author of the report. “It’s daunting for retirees to keep up with
expenses related to getting older.”

Women face acute challenges because they earn less than men and outlive
them by about four years1. They also spend more of their
monthly income on expenses than men (63% versus 58%) and have less
saved. On average, women have $37,000, earmarked for retirement, while
men have more than double that amount, $100,0001.

Millennials have the benefit of time to save and overcome their fears

Regardless of life stage, there are distinct actions to consider when approaching
retirement
. Millennials – born between 1981 and 1997 – have ample
time to save. And they started saving early – 10 years before baby
boomers – which means that “compounding could significantly impact their
savings,” said Veronica
Willis
, investment strategy analyst for WFII and a report author.
“But, millennials will also have less assistance than previous
generations,” because employers have increasingly done away with pension
plans.

Millennials, who still are early in their careers, should take advantage
of automatic 401(k) enrollment and employer matching benefits. They
should also try to preserve their retirement savings when shifting jobs
and not cash out. To help combat fears of investing in riskier assets, a
by-product of experiencing a deep U.S. recession early in their lives,
the report outlines that millennials should “keep holdings diversified
among growth assets – such as global equities and real estate, and more
conservative assets, such as fixed income.”

Generation Xers are less confident as they balance family obligations

Many Gen Xers support children and aging parents at the same time.
Therefore the group – born between 1965 and 1980 – may have shortchanged
their own savings. Gen Xers should evaluate the need for life insurance
or disability insurance, particularly if they have younger children. As
circumstances change, Gen Xers should regularly rebalance to target
their allocations. “Holding enough cash – roughly six to 18 months of
living expenses – is important to your asset allocation mix,” McMillion
said.

Gen Xers have had access to 401(k)s for most of their working years.
And, after the age 50, they can explore “catch-up contributions” to help
increase savings. “Remember, you can secure loans to pay for an
education but not to fund retirement,” McMillion said.

Baby boomers ease into retirement on their own terms

63% of baby boomers are worried they will run out of money during
retirement. To supplement the shortfall, some are turning to part-time
or full-time jobs or starting their own businesses. Other ways they can
manage expenses include moving to a state with a lower income tax rate
or cost of living, reducing tax obligations, and shifting health-care
costs to an employer.

“Baby boomers may want to maintain a higher allocation to equities
during retirement, depending on their risk tolerance,” McMillion said.
This group – born between 1946 and 1964 – also should devise a plan for
when they tap into Social Security, whose benefits increase 8% per year
for those who delay their full retirement until age 70, the report
states.

Why retirees should consider a total return approach

Regardless of life stage, retirees may not be able to rely solely on
income generated from a portfolio to fund their living expenses, and the
report cautions against “chasing yield,” that is investing in riskier
assets just because they have higher yields. Investors should instead
ensure their portfolios reflect a total-return approach by “funding
costs with both the potential price appreciation (growth) of assets and
the interest or dividends received (income) from those assets,” the
report concludes.

1 – 2018
Wells Fargo Retirement Study
, October 15, 2018

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Wells Fargo’s
vision is to satisfy our customers’ financial needs and help them
succeed financially. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, investment and mortgage products and
services, as well as consumer and commercial finance, through 7,700
locations, more than 13,000 ATMs, the internet (wellsfargo.com) and
mobile banking, and has offices in 33 countries and territories to
support customers who conduct business in the global economy. With
approximately 262,000 team members, Wells Fargo serves one in three
households in the United States. Wells Fargo & Company was ranked No. 26
on Fortune’s 2018 rankings of America’s largest corporations. News,
insights and perspectives from Wells Fargo are also available at Wells
Fargo Stories
. Wells Fargo Investment Institute, Inc. is a
registered investment adviser and wholly owned subsidiary of Wells Fargo
Bank, N.A., a bank affiliate of Wells Fargo & Company.

General Disclosures

Equity securities are subject to market risk which means their value may
fluctuate in response to general economic and market conditions and the
perception of individual issuers. Investments in equity securities are
generally more volatile than other types of securities.

Contacts

Media
Kelly Reilly, 314-797-9701
[email protected]

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