Gen X Trailing in Retirement Planning

The commentary on Gen X being overlooked by the financial services industry will be left for another day. Smart advisors aren’t ignoring this generation. After all, the much ballyhooed great wealth transfer will first matriculate to Gen X and then onward to younger generations.

Beyond that point, the oldest members of Gen X are now 58 years, meaning that drawing closer to the earliest at age which they can claim Social Security benefits and are starting to near traditional retirement age range. Problem is many in the 43 to 58 age cohort feel they’re ill-prepared for a comfortable retirement.

For starters, Gen X is the first generation to enter the workforce en masse just as private sector defined benefit pensions were going by the wayside. Sure, 401(k) plans, which came of age as Gen X entered the workforce and moved up the corporate ladder, are nice, but they lack the security and steadiness of defined benefit pensions.

Additionally, though the problem has worsened in dramatic fashion, Gen X was the first generation to take student loan debt in bulk. They’ve also had bouts of being seduced by credit cards and other entrapments that have plagued retirement planning. In other words, if there’s a generation that could use financial advisors, it’s Gen X.

Gen X Trailing in Retirement Planning

Schroders 2023 U.S. Retirement Survey confirms the extent to which Gen X is lagging in the retirement department.

“According to the Schroders 2023 U.S. Retirement Survey, non-retired Americans between the ages 43 and 58 (Generation X) say on average it will take $1,112,183 in savings to retire comfortably, yet they expect to have just $661,013 saved.  The resulting savings gap of $451,170 tops the expected shortfall facing Millennials and Baby Boomers,” notes the research firm.

Compounding that woe is the fact that 45% of still working Gen Xers haven’t saved anything at all for retirement – a percentage that’s worse than what’s seen across boomers, Gen Z and millennials. Someone that’s 45 or 50 with no retirement savings or plan is figuratively (maybe literally) screaming for the help of a financial professional.

“The size of the retirement savings gap facing Gen X is concerning, as they are the first generation to rely on 401k plans instead of pensions and the next in line to retire,” said Deb Boyden, Head of U.S. Defined Contribution at Schroders.  “Fortunately, even the oldest Gen Xers have some time before reaching their full retirement age.  Using this time to develop a retirement plan and increase their savings rate is crucial to improving their retirement readiness before it’s too late.”

Planning Is Pivotal

With retirement expectations shifting and with Gen X already behind the retirement eight ball, planning is essential to fill in the gaps and doing so sooner than later is mandatory. Advisors are crucial in accomplishing the planning objective for Gen Xers looking to better their retirement positions.

“Underscoring the need for a plan, non-retired Gen Xers are allocating on average 32% of their assets earmarked for retirement to cash despite their time horizon and sizeable retirement saving gap.  When asked about the reasons for investing their retirement assets in cash, almost two-thirds of these Gen Xers (63%) say they fear losing their money and nearly one-quarter (24%) report they are not sure how best to invest their savings,” concludes Schroders.

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