Millions of Americans born between 1965 and 1980, collectively known as Generation X, are heading into retirement woefully unprepared financially for retirement, according to a recent analysis.
The typical Gen X household with a private retirement plan has $40,000 in savings, according to a report released this week by the National Institute on Retirement Security (NIRS). The numbers are even more alarming for low-income Gen-Xers, who failed to save more than around $4,300, and often even less, the group found. Among all members of the generation, about 40% do not have a penny of savings for retirement.
“Gen Xers are fast approaching retirement age, but data indicates the vast majority aren’t even close to having enough savings to retire,” said the executive director of the NIRS, Dan Doonan, in a statement. “Most Gen Xers don’t have a pension, they’ve been through multiple economic crises, wages aren’t keeping up with inflation, and costs are rising. The American dream of retirement is going to be a nightmare for too many generations. -Xers.”
Polls show that many Americans believe they will need savings of at least $1 million to retire comfortably.
Barriers to savings
A major issue for Gen-Xers is their limited access to a pension or 401(k) plan through their work: only 55% of Gen-X workers participate in an employer-sponsored plan, according to NIRS. Other barriers to investing money include student loan debt higher than baby boomers, while salary growth for Gen-Xers has been steady for most of their careers, the group noted. .
To help people save, NIRS supports increasing the number of states across the country that offer retirement plans, noting that Minnesota, Missouri, Nevada and Vermont offer programs for residents who don’t. do not have access to an employer plan. Combined, those states helped residents save $838 million on 680,000 retirement accounts, the study notes.
Congress should also consider giving Americans a caregiver tax credit, the researchers said. This would particularly benefit Gen Xers, many of whom are “caring for aging parents on one side and raising children on the other,” the NIRS said.
“Building up savings takes time, and Social Security alone will not provide sufficient retirement income,” NIRS research director Tyler Bond said in a statement. “So it’s extremely important that we change course quickly. The status quo means we’re looking at old-age poverty for many Gen Xers and the strain on their families for support.”
The study used data from Prudential Financial, T. Rowe Price, Vanguard and Fidelity Investments as well as research from the Pew Research Center, AARP, Federal Reserve Bank of San Francisco and the US Department of Labor.
Gen Xers — the roughly 64 million Americans sandwiched between baby boomers and millennials — aren’t the only ones struggling to meet their retirement goals. Although baby boomers say they need $1.1 million for retirement, median retirement savings are $120,000 for this generation, according to recent research by Natixis Investment Managers.