Gen X has the largest wealth gap of any generation, and it means ‘the American Dream of retirement is going to be a nightmare’ for them (2024)
Alicia Adamczyk
·4 min read
Retirement bites. The oldest members of Generation X are swiftly approaching the traditional retirement age, but few are financially prepared for the next chapter, a new report finds.
Sandwiched between the larger baby boomer and millennial generations, Gen X typically doesn't get as much attention as its older and younger cohorts despite making up around 20% of the population. But America needs to start paying attention: Born between 1965 and 1980, the Gen Xers on the cusp of their seventh decade are, theoretically, just a few years away from leaving the workforce.
And according to new research, many are not prepared for a comfortable retirement. They have the largest wealth gap of any generation, according to the Schroders 2023 U.S. Retirement Survey. On average, these workers say it will take a bit over $1.1 million in savings to retire comfortably, but expect to have around $660,000 saved. Over 60% of non-retired Gen Xers are not confident in their ability to achieve a dream retirement, compared to 49% of millennials and 53% of baby boomers.
Of course, that's only perception. But Schroders is far from the only report that finds Gen X isn't financially prepared for retirement. A recent study from the National Institute on Retirement Security (NIRS), a nonprofit research organization, found the typical Gen X household has $40,000 in retirement savings, while the average has $153,300, according to Fidelity Investments, far less than the $1.1 million they think they'll need. (Averages are often skewed by a few wealthier account holders.)
As the difference between the typical amount and the average indicates, retirement savings is highly concentrated among top Gen X earners, according to NIRS's report: The top 25% has $250,000, on average, while the bottom quartile has around $35,000. The median is more striking, with the bottom quartile having just $200—“almost nothing.”
In fact, Gen X is the only generation in which a majority believe they won't be financially prepared for retirement, according to Northwestern Mutual's 2023 Planning & Progress Study. They also report "markedly lower" feelings of financial security than other generations.
The stakes are high for Gen X
Underfunding retirement isn't unique to Gen X. Every generation has challenges when it comes to saving for the future, and over half of workers feel behind on building up their retirement accounts, according to a recent Bankrate study. But Gen X is most likely to feel this way, according to the survey.
And Gen X is also notable because "they are the first generation to rely on 401(k) plans instead of pensions and the next in line to retire," says Deb Boyden, head of U.S. defined contribution at Schroders. Only about 14% of Gen Xers have a pension; broadly speaking, Gen X is on the hook for saving for a lot more of their retirement on their own than boomers. While millennials get a lot of the attention for this shift in the retirement landscape, Gen X will be the pioneers of managing the changes. "The stakes are higher for Generation X and the margin for error is lower," Boyden says.
They also faced the rise of student loan debt, as well as higher health care costs than the generations before them. They are projected to live longer than boomers, meaning they will likely need even more saved.
That said, not all is lost for the "forgotten generation." Some 71% own their homes, according to Redfin, and many still have decades until retirement, giving them plenty of time to put a plan together and still reap the benefits of compound interest. It's normal for many people to start saving for retirement in their forties and sometimes even fifties.
But that would require a big shift in behavior: According to the NIRS, only around half of Gen Xers are actually participating in a workplace retirement plan, a statistic that may be difficult to improve with the rising cost of living and other financial headwinds (many Gen Xers are also likely to be caring for both children and older relatives).
"Most Gen Xers don’t have a pension plan, they’ve lived through multiple economic crises, wages aren’t keeping up with inflation, and costs are rising," Dan Doonan, executive director of the NIRS, said in a statement. "The American dream of retirement is going to be a nightmare for too many Gen Xers."
Fortune senior writer Alicia Adamczyk is looking for Gen Xers (ages 43 to 58) to interview about their retirement readiness for a future story. If you're interested, email her at alicia.adamczyk@fortune.com.
1 More Than Half of US Wealth Belongs to Baby Boomers: Will Other Generations Catch Up? 2 The 'wealth transfer' from boomers won't save Gen X and millennials. 3 Gen X has the largest wealth gap of any generation: 'Retirement is going to be a nightmare'. 4 Why Millennials Can't Seem To Get Ahead.
The nub of the NIRS research: The median account balance for an individual in Gen X is only $10,000, which means half of Gen Xers have less than that amount saved for retirement. One in four Gen Xers don't have a retirement savings account, per these findings, which is even worse than the Prudential folks discovered.
They have the largest wealth gap of any generation, according to the Schroders 2023 U.S. Retirement Survey. On average, these workers say it will take a bit over $1.1 million in savings to retire comfortably, but expect to have around $660,000 saved.
Northwestern Mutual's 2024 Planning & Progress Study put some troubling numbers behind those concerns. In that survey, members of Gen X said they felt they needed $1.56 million to retire comfortably. On average, they've saved about 7% of that, or $108,600.
Only 40 percent of Gen X workers believe they'll be able to save enough to retire comfortably, according to a September 2023 Bankrate survey. Further complicating matters, economic factors like high interest rates and inflation have made it even harder for many Americans, regardless of age, to save.
While this generation is experiencing peak incomes, they also have significant student loan debt, high debt in general and low confidence in their retirement prospects. There are some steps you can take to ease your stress level and feel more financially secure.
When Gen Xers have time to think about themselves, they're often worried about money. Gen X can't afford to put the same trust their parents did in benefit programs like Social Security to provide for them in their old age. Saving for retirement is a huge source of stress.
Their laid-back demeanor might be misinterpreted, leading to them to be overlooked for promotions. PeopleScout surveys reveal a concerning truth: 79% of Gen X feel neglected at work and overshadowed by both younger and older colleagues.
That could get tougher once everyone realizes just how well off Gen Xers have become. Over the course of the pandemic Gen X, which includes those people born between 1965 and 1980, quietly overtook every other generation to become the wealthiest in Canada, according to data from Statistics Canada.
Their core values of dependability, safety, societal stability, and care for loved ones guide their choices across various aspects of life. Gen X's practical and skeptical approach offers a unique lens through which to navigate a complex world, prioritizing well-informed choices grounded in both reason and compassion.
Gen X are major spenders in US consumer goods & general merchandise, surpassing even Boomers. As their children begin to start their own lives and raise families of their own, Gen X is becoming empty nesters. They are transfering their lucrative spend to other categories, brands and retailers.
Yes, retiring at 65 with $1 million is achievable. However, it's important to consider various factors such as the cost of living in your desired retirement location, the taxes on your withdrawals, and your preferred lifestyle during retirement to accurately determine if this amount will suffice.
Can I retire on 500k plus Social Security? As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, this becomes even more of a possibility. In retirement, Social Security benefits can provide an additional $1,900 per month, on average.
Retiring with $200k is possible but not ideal. If you're closer to retirement age and hoping to leave the working world sooner rather than later, budget carefully and set realistic expectations; only then can you decide what's within your power and right for your situation.
Things aren't looking good for Gen X, which is said to have the largest wealth gap of any generation. Not having a pension plan, suffering multiple economic crises, and not seeing wage increases that keep up with inflation are all reasons that those ages 44-59 are struggling when it comes to building a nest egg.
Born between the early 1960s and early 1980s, most Gen X consumers have a home mortgage, own a car they pay for in installments, among other consumer loans, and have had several credit cards for years, making this the most indebted generation.
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