Closing the Retirement Gap: Strategic Actions for Baby Boomers and Younger Generations

The retirement savings landscape in the United States is undergoing a generational shift, with younger workers outpacing older generations in retirement readiness despite carrying higher debt burdens. According to a Vanguard report, nearly half of Gen Z workers are projected to be financially ready for retirement, compared to 40% of Baby Boomers. This trend is driven by broader access to defined contribution (DC) plans, which offer employer contributions, automatic savings features, and compounding advantages. However, systemic challenges-such as market volatility, income inequality, and housing affordability-persist, requiring integrated strategies to close the retirement gap for all age groups.

The Rise of Defined Contribution Plans and Their Limitations

DC plans, including 401(k)s and IRAs, have become the cornerstone of retirement savings in the U.S. Workers with access to these plans are twice as likely to meet retirement goals compared to those without access. For example, the median worker with DC plan access had $83,000 in non-housing net wealth in 2022, versus $13,000 for those without access. Yet, these plans face inherent limitations. They rely heavily on market performance, and many participants struggle with low savings rates, poor investment choices, and inadequate education on converting savings into lifelong income streams according to Trowe Price research.

Recent innovations aim to address these gaps. Hybrid target-date funds (TDFs), which combine traditional TDFs with annuity-like features, are gaining traction. These products aim to smooth returns and provide guaranteed income, addressing longevity risks. Additionally, the integration of alternative assets-such as real estate and private equity-into TDFs is enhancing diversification and inflation protection according to J.P. Morgan research. For instance, J.P. Morgan's research highlights that portfolios with direct real estate exposure have historically delivered higher returns with lower volatility.

Housing Equity as a Complementary Tool

For Baby Boomers and Gen Xers, housing equity remains a critical but underutilized asset. Nearly 90% of Baby Boomers own a home, yet many struggle to convert this equity into retirement income. Reverse mortgages, particularly Home Equity Conversion Mortgages (HECMs), are emerging as a solution. These FHA-insured loans allow seniors to access cash without selling their homes, with 95% of borrowers opting for lines of credit. Market forecasts predict the global reverse mortgage market will grow at a 5.9% CAGR, reaching $2.71 billion by 2030.

Younger generations, meanwhile, are adopting innovative housing strategies to bridge affordability gaps. Gen Z and Millennials are increasingly co-buying homes, house hacking (renting out parts of their homes), and leveraging technology to optimize housing costs. For example, 70% of Gen Z and Millennials are open to co-buying, and 22% of Millennials have already purchased a home with a sibling. These strategies not only reduce housing costs but also create pathways to build equity that can later supplement retirement savings.

Systemic Integration: Combining DC Plans and Housing Equity

The most effective retirement strategies integrate DC plans with housing equity conversion. For Baby Boomers, this might involve downsizing to lower-cost areas, selling homes, or using reverse mortgages to supplement retirement income. Vanguard research suggests that unlocking home equity could increase retirement readiness for lower-income boomers, with a typical $56,000 earner retiring with $120,000 in net worth facing a $9,000 annual spending shortfall.

For younger generations, the integration is more forward-looking. By prioritizing early retirement savings, 50% of Millennials opened 401(k)s or IRAs in 2025, while also adopting flexible housing strategies, they are building a dual foundation of financial and real estate wealth. For example, house hacking allows Millennials to offset mortgage costs, while HELOCs and HELOANs provide liquidity for retirement accounts or emergency expenses.

Case Studies and Policy Implications

Systemic integration is already being tested in practice. Hybrid default solutions, which combine TDFs with guaranteed income products, are being adopted by employers to help retirees transition from accumulation to spending. Additionally, the SECURE 2.0 Act of 2022 has encouraged plan sponsors to offer in-plan annuities and expand pre-retiree education.

Policy reforms could further bridge the gap. Improving Social Security, promoting automatic enrollment in DC plans, and expanding access to affordable housing are critical. For instance, wellness communities like Serenbe in Atlanta, which emphasize age-friendly design and social interaction, offer models for integrating housing and retirement planning.

Conclusion

Closing the retirement gap requires a multifaceted approach that leverages the strengths of DC plans and housing equity conversion. While younger generations are outpacing older cohorts in savings rates, systemic challenges like income inequality and housing affordability demand coordinated solutions. By integrating innovative financial tools, policy reforms, and generational-specific strategies, the U.S. can build a more resilient retirement system for all.