Generation X is about to retire. And no one in the United States, including most of this generation is prepared.
As the oldest members of Generation X approach the age of 59 1/2, a significant milestone for retirement savings withdrawal without penalty, many find themselves unprepared for retirement. A new study by Natixis reveals that nearly half of Gen Xers believe a “miracle” would be needed for them to retire comfortably. This generation, born between 1965 and 1980, is notably the first to primarily rely on 401(k) plans after employers shifted away from traditional pensions in the 1980s.
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The reliance on 401(k) plans has left Gen Xers with the significant responsibility of managing their retirement savings independently. This “do-it-yourself” approach to retirement savings, critiqued by experts like Teresa Ghilarducci as inadequate, has resulted in a lack of preparedness among many in this generation. On average, Gen X households have saved about $150,000 for retirement, significantly short of the $1.5 million that many Americans believe is necessary for a comfortable retirement.
Gen X has often been overlooked, sandwiched between the larger baby boomer and millennial generations, a sentiment echoed by Dave Goodsell, executive director of the Natixis Center for Investor Insight. This generational oversight translates into their retirement planning, where many feel they’re navigating their futures alone. Alarmingly, about 20% of Gen Xers fear that even saving $1 million wouldn’t suffice for retirement, and about 25% worry they might need to return to work due to insufficient funds.
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Despite these concerns, many Gen Xers still dream of retiring early, around the age of 60, with expectations of their retirement lasting approximately 20 years—shorter than actual retiree experiences. However, their financial strategies may be overly optimistic, with expectations of annual investment returns of 13.1% above inflation, far exceeding typical market performance.
Moreover, a concerning lack of understanding about basic investment principles, particularly in bonds, exacerbates their financial preparedness issues. Only about 2% of Gen Xers show a comprehensive grasp of how higher interest rates affect bond prices. Goodsell advises Gen Xers to educate themselves and set realistic financial goals to better prepare for the future. Additionally, he notes that external factors such as health and employment longevity, often out of individual control, add to the retirement planning challenges faced by Gen X.
Major Points
- The oldest members of Generation X are approaching 59 1/2, the age for penalty-free retirement withdrawals, but many are unprepared, with almost half believing it would take a miracle to retire comfortably.
- Generation X, growing up as the first to rely on 401(k) plans due to a shift from traditional pensions, faces the burden of managing their retirement savings independently.
- The average retirement savings for Gen X households is approximately $150,000, far below the estimated $1.5 million needed for a comfortable retirement.
- Despite concerns over inadequate funds, many Gen Xers still plan to retire early at around 60, though they hold unrealistic expectations for high investment returns.
- A lack of understanding of investment basics, especially in bonds, compounds their retirement challenges, highlighting a need for more financial education and realistic planning.
Conner T – Reprinted with permission of Whatfinger News
