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Generation X and the Realities of Approaching Retirement

Born in 1978, I am on the tail end of what is considered Generation X. Generations tend to be defined by the time period in which they grew up. Gen Xers, as we are known, are typically described as being resourceful and independent. They are also known as a tech-savvy generation, but not necessarily tech dependent. They remember life before computers and iPhones. Thinking about the original Nintendo, Air Jordan sneakers, and Blockbuster Video brings an immediate dose of nostalgia to me.

According to research and several articles I have recently seen, there is another characteristic that could describe my generation. Generation X tends to be the least prepared for retirement of any generation. As a financial advisor from this generation, that saddens me. To be fair, research shows most people from all generations are underprepared for retirement, but Gen Xers tend to be the least prepared.

Generation X, typically defined as the generation born between 1965-1980, is the next in line to retire after Baby Boomers. According to an article from Fortune, they will be the first generation to retire with less financial security than their parents or grandparents. Why is this the case? Several factors come into play, but one of the biggest hurdles Gen Xers face is the decline of traditional pension plans. Unlike their parents’ generation, who could rely on a guaranteed income in retirement, most Gen Xers have had to navigate the shift to defined-contribution plans like 401(k)s. While these plans offer some benefits, this change moves a great deal of the responsibility to provide for retirement from employers to their employees.

With further responsibility placed on individuals to save, research unfortunately shows a shortfall in Gen Xers retirement savings. A report from the National Institute on Retirement Security shows the typical, or median, Generation X household has only $40,000 in retirement savings in private accounts, including their defined contribution plans through their employer. Furthermore, the report shows 28% of Gen X households have no retirement savings at all. For perspective, a chart from JP Morgan estimates a 50-year-old couple (near the middle of Generation X) with a total annual household income of $100,000 would need about $395,000 in retirement savings today to be considered on track for retirement.

There also appears to be an investment and financial literacy gap with Gen Xers. A study from Schroders shows that those who have saved for retirement have, on average, 32% of their retirement plan assets in cash with 64% citing a fear of losing money and 24% of savers unsure of how to best invest their savings. One encouraging statistic from this same study shows that more than half of Gen Xers (55%) have done at least some retirement planning. As encouraging as this may be, it also means nearly half of this generation has done no planning at all.

For anyone (not just Gen Xers) behind in their retirement savings, planning is where it starts. Planning will help establish goals, create a roadmap of how to achieve your goals, and help keep you disciplined. Planning can address the issues many retirees face, such as lack of a pension plan, how much one should save, and how to invest retirement savings. It’s never too late to start planning for retirement. The team at BCS Wealth Management is here to help.

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