Gen X Is Running Short on Retirement Time, With Half Holding Less Than $113,000

KEY TAKEAWAYS

• More than half of Gen X expect to retire after 65 or never retire, and many have not saved enough as retirement nears.

• Gen X workers have the lowest confidence in their ability to retire comfortably.

• Experts say younger Gen Xers who are behind should save more aggressively, while older members of the cohort should plan around the nest egg they actually have.

Gen X is approaching retirement age, but many have saved barely enough to replace a single year of their current income.

More than half of Generation X, defined here as people born between 1965 and 1980, expect to retire after 65 or not retire at all, according to a survey from the nonprofit Transamerica Center for Retirement Studies. That compares with 44% of workers overall. One major obstacle is simple: many have not accumulated enough savings.

Fidelity says workers should have about four times their annual income saved by age 45 and roughly eight times their annual income by age 60. In the survey, the average Gen X household income was $101,000, which would translate to at least $400,000 saved by age 45 under Fidelity’s guideline. The median retirement balance among Gen X respondents was $113,000.

The median Gen Xer started saving for retirement at age 30, three years later than workers overall and nine years later than Gen Z, the youngest generation in the workforce.

Gen X joined the labor force in the 1980s and 1990s, just as employers were moving away from pensions and toward 401(k)s and IRAs. Younger generations entered work when the 401(k) was increasingly becoming the default, and many of them began saving earlier.

“The onus shifted from the employer-funded retirement plans to the employee-funded 401(k)s with a match...and this happened very quietly,” said Catherine Collinson, CEO and president of the Transamerica Institute’s Center for Retirement Studies. “If you were an older Gen Xer in the late ‘80s, early ‘90s and lucky enough to have a 401(k), chances are you were unaware that down the road it was going to become such a critical component of your retirement.”

Why This Matters

Many workers do not get to choose when they retire, since health problems or a job loss can force them out of the workforce. For Gen Xers, planning for that possibility is important to their future financial security.

Gen X workers also express the least confidence that they will retire comfortably. Only 18% are very confident, and 62% are at least somewhat confident, seven percentage points below workers overall and the lowest level among all generations.

Gen Xers are also the least likely to say they are building a large enough nest egg, at 63%.

There Is Still Time To Catch Up

The younger members of Gen X, now in their mid-40s to mid-50s, still have some room to increase their savings.

Myranda Fabian, a certified financial planner and wealth management partner with Plante Moran Financial Advisors, recommends that younger Gen Xers save as aggressively as possible without draining emergency reserves or taking on debt.

“Most people will get some kind of raise or bonus throughout the year, and not letting that lifestyle creep happen as that salary increases during that time,” Fabian said.

Workers should make sure they are contributing enough to capture their employer match, she said. Fabian also recommends using different tax-advantaged accounts, including traditional and Roth 401(k) contributions, an IRA, or a health savings account.

She also suggests directing money that will not be needed for years into a growth-focused portfolio, “as long as they have the appetite for risk and can kind of stomach it.”

Workers age 50 and older can also make catch-up contributions, which increase the annual limits for 401(k) and IRA savings.

For older Gen Xers, the focus should shift to estimating what retirement will cost and when they can realistically stop working, Fabian said.

That means building a retirement budget and measuring how well savings, income from assets, pensions, and Social Security will cover those expenses. If there is a gap, workers need to decide whether to reduce spending or remain in the workforce longer, Fabian said.

Working longer or moving into semi-retirement can offer more than just added income: Gen Xers who expect to work in retirement cite staying active as a reason 52% of the time, and enjoying their work 35% of the time, the survey found. Part-time work can also allow them to delay Social Security until full retirement age or as late as age 70 in order to increase benefits.

For older Gen Xers, Fabian said the shortfall is unlikely to disappear simply by saving more. “It’s less about just saving more because that’s not a great answer for people in their later years,” Fabian said.

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