Is Gen X ready for retirement?
Generation X (born roughly 1965–1980) is widely reported to be facing significant challenges with retirement readiness. The consensus from recent studies is that many in Generation X are not on track to retire comfortably and are concerned about their financial futures. However, they are also one of the least likely demographics to seek financial and investment advisement.
Here are the key takeaways and factors contributing to their situation:
Key Concerns and Statistics
Surveys and studies show that many Gen Xers feel they are significantly behind on preparing for retirement. On average, members of Gen X believe they will need around $1.07 to $1.57 million to retire comfortably, but expect to have a much lower amount saved. One survey shows an expected average of about $603,000 saved, leaving a substantial gap. The median retirement savings for a typical Gen X household is reported as low as $40,000, with a significant percentage having nothing saved in a private retirement account. More than half of Gen Xers report that they are not confident that they will be able to retire financially when and how they want. A higher percentage are worried about running out of money in retirement, compared to Baby Boomers. With medical advances and better health, life expectancies are longer, which will require more money.
With all those concerns and fears, still nearly half of Gen Xers have not done any formal retirement planning.
Factors Contributing to the Challenges
Gen X is the first generation to truly feel the impact of the widespread shift from defined-benefit pension plans to defined-contribution plans (like 401(k)s), placing the full burden of saving and investing on the individual. Many Gen Xers find themselves in the "Sandwich Generation," navigating high costs from caring for their aging parents while simultaneously supporting their adult or college-aged children, which strains their ability to prioritize retirement saving and investing. Often, Gen X carries high levels of consumer debt, including mortgages, auto loans, and high-interest credit cards balances, which compete with retirement contributions. They have faced multiple major economic downturns during their prime working years, including the dot-com burst, the Great Recession, and the impact of the COVID-19 pandemic and subsequent inflation.
Common Strategies to Catch Up
Despite the challenges, it's not too late to prepare for retirement, especially since Gen X is in its peak earning years. Here are some things you can do:
- Maximizing "Catch-Up" Contributions: Those age 50 and older can make extra contributions to 401(k)s and IRAs above the standard limits.
- Prioritizing Debt Reduction: Eliminating high-interest debt frees up cash flow for retirement savings.
- Seeking Professional Guidance: Gen X is less likely to work with a financial advisor than Boomers, but professional help is often recommended to create a concrete plan.
- Planning to Work Longer: Many Gen Xers expect to work past the traditional retirement age, either by choice or necessity, to close the savings gap and maximize Social Security benefits.
It's okay to talk about money, and it's okay not to be totally sure about how or when retirement happens. We specialize in helping people define their goals and set plans in place to move toward those goals. Call or email us today for your complimentary consultation.
