Is Generation X overlooking the reality of their upcoming retirement?

Generation X, born between 1965 and 1980, will be the next group to retire following the baby boomers. This generation is often characterized by its financial struggles: they were the first to navigate the workforce without widespread access to pensions, instead depending on the newer 401(k) plans. The most significant economic challenge for them was the Great Recession in 2008.

As the oldest members of Gen X near 60, many may not be adequately prepared for the transition to retirement.

A recent survey by New York Life titled Wealth Watch indicates that a large portion of Generation X is significantly unprepared for retirement.

According to the survey, only 46% of Gen Xers are “actively planning for retirement,” despite their age.

Furthermore, about 70% of Gen X respondents anticipate they will retire “later than expected,” or potentially not at all. Only 25% believe they will retire on time. This survey, conducted in September, included responses from 2,230 adults.

‘The Forever Work Generation’

“Many Gen Xers seem resigned to the idea that they will likely have to work indefinitely,” commented Matt Schulz, the chief credit analyst at LendingTree, a personal finance website.

The concerns surrounding retirement for Gen Xers are valid.

According to the federal Survey of Consumer Finances, in 2022, those aged 45 to 54 in Generation X reported a median net worth of about $247,000.

This figure is lower than the median net worth of baby boomers at the same age, which was around $265,000 in 2007, adjusted for inflation.

This disparity indicates that Generation X has faced greater difficulties compared to other generations in bouncing back from the 2008 Great Recession.

“The cumulative impact of various challenges throughout their lives seems to have taken a toll on Gen X,” stated KC Boas, head of retirement thought leadership and marketing at BlackRock, a global investment firm.

From the Dot-Com Bubble to the Great Recession

Many Gen X individuals began their careers around the time of the dot-com bubble, a period characterized by a brief surge in tech stocks before collapsing in 2000, causing the market to plummet.

Not long after, when many Gen Xers were in their most lucrative working years, the Great Recession struck. Although all generations faced challenges in 2008, studies indicate that Generation X was particularly hard hit.

“Older demographics may have experienced greater losses due to having more assets at risk,” explained Catherine Collinson, CEO of the nonprofit Transamerica Center for Retirement Studies.

Late baby boomers, born between 1960 and 1965, were also at their peak earning years during the Great Recession. Currently, this group has fewer retirement savings compared to those born in the 1950s or earlier. Both Gen X and baby boomers faced similar adversities.

Conversely, millennials, born from 1981 to 1996, are in a better financial position today than Generation X was at a similar age, according to a recent analysis by LendingTree.

As of 2022, millennials reported a median net worth of $84,941, while Generation X had a lower net worth of $78,333, adjusted for inflation during the same period.

Millennials are also financially better off than baby boomers were at their age. However, baby boomers are significantly more likely to have workplace pensions, which provide a dependable source of income in retirement.

Gen X Entered the Job Market Amid Diminishing Pensions

Generation X started their careers at a time when traditional workplace pensions were becoming less common. This shift meant that most workers had to rely on personal retirement savings through 401(k) plans and Individual Retirement Accounts.

Initially, 401(k) plans were scarce, contributing to many Gen Xers beginning their retirement savings later than they should have.

“This occurred without proper educational resources and support,” explained Jessica Ruggles, who oversees financial wellness at New York Life. “It wasn’t until much later that options like automatic enrollment and contributions became standard practices, boosting retirement savings rates.”

Schulz, a 52-year-old from LendingTree, identifies as a classic Gen Xer. He secured his first significant job around 1995 when he was in his early twenties.

“At that age, I hardly thought about retirement, or anything related,” he recalled.

According to the Transamerica Center, the average Gen Xer starts saving for retirement at 30, which is five years later than millennials. Today, Gen X households possess a median of $93,000 in retirement savings—far from adequate, according to many financial experts.

Consequently, a majority of Gen Xers now intend to continue working during retirement.

This data is drawn from the 2024 Transamerica Retirement Survey, which surveyed 5,730 workers.

Gen X Faces Unique Challenges in Retirement Preparation

Other retirement studies indicate that Generation X has distinct challenges when it comes to preparing for retirement.

Currently, only 60% of Gen Xers feel they are “on track” for retirement, which is the lowest percentage among all generations, as per the 2024 BlackRock Read on Retirement report.

Three out of five Gen Xers fear they might outlive their retirement funds, according to findings from BlackRock. Additionally, only 40% of Gen Xers engage a financial adviser—the lowest of any generational group.

Furthermore, Generation X appears to struggle with credit card debt. A recent report from Bankrate revealed that over 27% of Gen X cardholders have maxed out their credit limits.

This demographic is more inclined than both millennials and baby boomers to run out of credit, raising concerns among retirement specialists who believe that people should be reducing their debts as they near retirement rather than accumulating more.

The Bankrate survey involved 3,576 adults.

Gen X Holds Optimism for the Future

On a more positive note regarding retirement, Generation X has reduced their spending on non-essential items in 2024, according to Bank of America.

“Discretionary” spending, which refers to unnecessary expenses, has fallen by 2% for Gen Xers in the year through August, marking the largest decline across generations based on Bank of America’s internal card data.

Simultaneously, Generation X is investing a higher portion of their income compared to other generations, as highlighted in a report from the Bank of America Institute released in September.

“Overall, they are spending less and investing more,” remarked economist Joe Wadford from the Bank of America Institute. “This is definitely an encouraging sign that Gen X feels optimistic about the future. They believe they will retire successfully, and they have confidence that their investments will yield returns down the road.”