Experts recommend that Gen Xers stay active with hobbies and work to maintain mental, emotional and physical health.
Is Generation X on track for a comfortable retirement?
Unfortunately, most Gen Xers expect a gap between what they’ve saved and what they will need in retirement, a 2023 report on Gen X’s retirement readiness, based on a survey conducted by asset management firm Schroders, found.
According to the survey, 45% of Gen Xers have not done any retirement planning and 66% worry that they won’t grow their workplace retirement plan as much as they’d hoped.
While many baby boomers had defined-benefit pensions at work, Gen Xers are the first generation for whom 401(k) plans are the norm. This means workers are on their own to save for retirement rather than having an employer handle the task.
Gen X Wealth Gap
Gen Xers say they’ll need $1,112,183 to retire comfortably, according to the survey from Schroders. Meanwhile, on average, they expect to have only $661,013.
That gap of $451,170 is a significant shortfall in retirement planning.
While that appears bleak, there are some steps Gen Xers can take to shore up retirement savings and overall retirement readiness.
Gen X Workforce Advantages
Gen Xers may have some advantages the boomers didn’t have when it comes to extending their working years.
“Things are far less rigid now than previous generations experienced because you can carry your work with you,” said Alyson Austin, owner of media relations company Gaffney Austin in Plano, Texas, in an email.
Whereas baby boomer white-collar workers had to be in an office, Gen Xers have more flexibility, she said. That can allow them to generate income for a longer period.
“Your smartphone puts your work in your pocket,” said Austin, who runs her business from home. “We can answer questions on the go without having to be in the office by using a laptop or hand-held device.”
“Income can be generated from anywhere. From home, at a coffee shop or from the other side of the world,” she added.
The 401(k) Generation
The near-absence of pensions means Gen X is more concerned about the future of Social Security, said Cliff Ambrose, founder of Apex Wealth in Danvers, Massachusetts, in an email.
“The lack of guaranteed income streams means they’ll need to be more proactive about saving for retirement and might need to rely more heavily on personal savings and investments,” he said. “Social Security may still play a role, but it won’t provide the same level of security that boomers enjoyed.”
“As the first generation to head into retirement largely without the safety net of a defined-benefit pension plan, the stakes are higher for Generation X and the margin for error is lower,” said Deb Boyden, head of U.S. defined contribution at Schroders, in a statement.
But there is hope. “Fortunately, even the oldest Gen Xers have some time before reaching their full retirement age,” she said. “Using this time to develop a retirement plan, increase their savings rate and invest more appropriately is crucial to improving their retirement readiness before it’s too late.”
Economic Challenges for Gen X
While retirement saving isn’t easy for any generation, Gen X had to overcome some unique hurdles.
“Many dealt with the dot-com crash, the 2008 financial crisis and more recently, the pandemic,” Ambrose said. “These disruptions have impacted their savings and investments, making it harder to build wealth compared to boomers who had more stable economic periods.”
Gen X also has student loan debt and faces higher living costs, meaning they may need to work longer to compensate for financial setbacks.
Maximizing Retirement Savings
Gen Xers in the workforce can boost their savings using employer-sponsored plans and individual retirement accounts.
“If Gen X are still contributing to retirement accounts like 401(k)s or IRAs, they should maximize these contributions while they are still working, especially since catch-up contributions are allowed after age 50,” said Lori Van Dusen, founder and CEO of LVW Advisors in Pittsford, New York, in an email.
Longevity Plays a Role
Increases in life expectancy mean the retirement stakes are higher for Gen X who may live longer than boomers.
“With people living longer, Gen Xers may need to work a few more years to ensure they have enough saved to cover a potentially longer retirement,” Ambrose said.
That also means they should assess their savings and investment timeline, Van Dusen said.
“Look at a much longer time horizon. Consider whether your current retirement savings are sufficient to cover a potentially longer retirement period,” she said.
Gen Xers should consider delaying Social Security benefits until age 70 to maximize monthly payments. “Delaying beyond the full retirement age of 66 to 67 can significantly increase benefits, which can help offset the costs of a longer retirement,” she added.
Lifestyle Factors
Given the realities of longevity, Van Dusen recommends that Gen Xers stay active with hobbies and work to maintain mental, emotional and physical health. They should also consider factors such as where they live.
“Planning with longevity in mind means preparing for a long, sustainable and comfortable retirement, which requires balancing financial security with maintaining health and purpose over time,” she added. “Consider whether downsizing or moving to a more retirement-friendly location, in terms of cost of living, health care access and community, is an option.”
