Rapidly approaching retirement age, Generation X — defined most commonly as those born between 1965 and 1980 — will soon claim a significant share of the wealth generated by the stock market’s rise since the dawn of the economic recovery. Yet for many in this cohort, they’re not ready. As the clock runs down and the economic heat bears down, the warning goes out: Next is what? Gen X could be the first to retire to a level of economic prosperity far below that of their parents.
A Financially Forgotten Generation
Gen X is now in its 40s and 50s — ideal years for retirement savings growth — and typically eclipsed by Baby Boomers and Millennials. And The Financial Times cites data that said, sadly, only 28% of Gen Xers are on track for retirement savings goals. A true economic, perfect storm has combined an array of systemic disadvantages with economic challenges for the rest.
Born in the aftermath of the economic dislocations of the early ’90s, many Gen Xers entered adulthood on the heels of those shocks. So it is that they navigated careers through the dot-com crash, the Great Recession, and now inflation and housing crises. Those who lost jobs or withdrew from retirement accounts to meet emergencies have been ravaged by the compounding effect.
Caught Between Dependents and Debt
As a result, Gen X is grappling with one of the biggest hurdles, being a ‘sandwich generation’ burden — supporting both ageing parents and dependent children financially. When the institution bears this responsibility, it will drain savings and make long term financial planning more difficult.
Moreover, Gen X has more debt than past generations of that age. They are perturbed by mortgages, credit card debt, and particularly by (their own) student loan obligations for them and their children. However, while Boomers were often retiring with defined benefit pensions, Gen X has had to rely on personal savings, most often in 401(k)s and IRAs, and so the accounts are subject to market volatility and call for around-the-clock, disciplined, long-term investing.
Inflation and the Housing Crunch
This, in addition to the recent increase in inflation has only put additional pressure. Gen X households are also struggling as rising costs for groceries, gas and healthcare make it harder to stash away savings. Meanwhile, thanks to skyrocketing housing prices, many are locked out of downsizing options or they are supporting adult children that can’t afford to move out of their homes.
Not even those with homes are realizing that property taxes, maintenance costs and unpredictable interest rates are eroding ‘the rent that I pay to society,’ so heavily touted as an independent source of wealth.
The Role of Policy and Employers
For their part, experts say that sensible policy changes really could make a difference. It could help lower income savers with better tax incentives and automatic enrollment in retirement savings plans and by giving everyone universal access to employer sponsored plans.
“They have to play a more proactive role in preparing Gen X for retirement,” say financial advisors: Providing matching contributions, free financial planning tools, and education about catch-up contributions for workers over 50.
What’s Next for Gen X?
Gen X is running out of time with fewer than 15 20 years until full retirement age. But some are changing expectations — deciding to work later in life or spend less time in retirement or relying in part on a part-time job. Some are looking for more aggressive investment strategies to make up time lost.
One thing is clear: if nearly 50 million Americans don’t get their act together individually and the systems don’t change significantly, Gen X is headed for a retirement crisis unlike anything previous generations have ever faced.
Gen Xers, in the meantime, are being encouraged to start reviewing balances and trimming unnecessary spending — as long as there’s time.
