While much ink has been spilled on boomers and their retirement savings, a new report is sounding the alarm on their successors, who may be even worse off when it comes to retirement: Generation X.
A report by the Retirement Income Institute’s Alliance for Lifetime Income (ALI) has found that Gen X has “a fragile retirement foundation,” and that without taking certain measures, Gen Xers will be “entering retirement less secure than any generation before them.”
In fact, the median retirement savings for this group is shockingly low, with women saving $6,000 and men saving $13,000. Only 14% of Gen X have access to traditional pension, much less than the boomer generation, with 56% covered by a pension (1).
Generation X includes people who were born roughly between 1965 and 1980. In other words, they’re between the ages of 45 and 60 today — prime time when it comes to ramping up retirement savings.
However the “sandwich generation” is supporting both aging parents and their own children, with the result that they are among the least financially prepared for retirement.
Here’s why they’re facing a crisis, and what you can do if you find yourself way behind on your retirement savings track, including tips for increasing your savings.
Generation X has, according to the ALI report, lived through eight recessions, increases in the cost of higher education and student loan borrowing costs, and six of the 19 biggest U.S. stock market corrections.
In Gen Xers’ lifetimes, the way that most Americans saved for retirement also underwent “seismic” shifts, the report notes, with changes in the law during the 1970s that allowed employers to offer an alternative to pensions, known as defined contribution plans, essentially “placing the retirement savings responsibility onto the worker.”
In other words, the retirement savings methods of the past no longer apply to Gen X. As the report says, “The old metaphor of the three-legged stool of retirement planning — employer pensions, personal savings, and Social Security — no longer holds.”
Social Security, the report notes, is a program facing “structural shortfalls.” They project that Gen X will rely heavily on Social Security, with many people perhaps not knowing that “Social Security was only designed to replace approximately 40% of a retiree’s pre-retirement income.”
Speaking to CNBC, Jason Fichtner, former deputy commissioner of the SSA, the Retirement Income Institute’s executive director and co-author of the report, said that the impact is likely to be felt by the whole generation.
“I will be eligible for Social Security the year the trust fund is depleted. It becomes a personal issue as well.” (2)
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If you are also behind on your retirement savings, a good first step to getting on track can be to estimate how much retirement income you will need to maintain your standard of living.
According to the ALI report, a common rule of thumb for retirement assets is that they should provide about 70 to 75% of pre-retirement income.
You can also use the calculator on the Social Security Administration’s website to get an estimate of what your benefits could be.
Of course, this will require you knowing at what age you want to retire. A Corebridge Financial survey cited in the ALI report found four out of 10 Gen-Xers said they would have to work until they were somewhere between 65 and 69, and 27% said they’d have to work until 70 or later.
The SSA website also has a life expectancy calculator, so you can calculate approximately how long your retirement will be.
People over age 50 are eligible for up to $7,5000 in catch-up contributions to their 401(k)s, and in 2025, a new rule allows workers from ages 60 to 63 to make higher catch-up contributions — this year the limit is $11,250 (3).
Gen Xers should also make sure that if their employer offers any matching programs for retirement savings that they are taking full advantage.
They can also look into a health savings account (HSA), which is tax-advantaged, with contributions made pre-tax and withdrawals for medical costs that qualify tax-free.
It’s also important to remember that as you near retirement experts generally recommend gradually rebalancing your portfolio to increase the proportion of lower-risk investments.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Retirement Income Institute’s Alliance for Lifetime Income (ALI) (1); CNBC (2); IRS (3).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
