Vanguard’s Retirement Outlook report reveals a troubling reality for baby boomers and Gen X, with many not financially secure for retirement. Only the top 30% of income earners aged 61-65 are ready. The report emphasizes the need to address the potential depletion of the Social Security trust fund in eight years.

In contrast, younger generations like workers aged 24-28 and millennials are projected to be better prepared for retirement. They benefit from broader access to employer-provided 401(k) plans and newer features like auto-enrollment and auto-escalation of retirement savings. Target-date funds have also become a popular investment option in these plans.

However, the outlook is grim for those without access to employer-sponsored retirement plans, with about half of American workers falling into this category. Workers with access to DC plans are twice as likely to reach retirement savings goals. Implementing automated retirement savings programs in more states could help increase retirement readiness.

The report’s pessimistic tone stems from growing debt levels and cash-heavy asset allocations in savings accounts. Excluding home equity as a potential asset also contributes to the gloomy outlook. For baby boomers and Gen Xers nearing retirement, unlocking home equity or working longer could be viable strategies to improve financial security. Adding two more working years could help 1 in 10 workers achieve retirement security across all generations. Gen Z and millennial workers would see a spending gap turn into a surplus, while Gen X and baby boomers would see significant reductions in projected spending gaps.

Approximately 20% of people aged 65 or older were employed in 2023, a figure expected to rise with improved education, health, and more age-friendly, less physically demanding occupations, according to researchers. Working two years longer could result in increased career savings, higher Social Security income, and fewer years of retirement to fund.

Kerry Hannon, a Senior Columnist at Yahoo Finance, is a career and retirement strategist and author of 14 books, including “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.” Follow her on Bluesky for more insights.

Read more at Yahoo Finance: Many boomers are losing the battle for retirement security. Gen Xers? Doing a bit better.