The Forgotten Generation: Generation X and Retirement Savings

by Warren Seah

Generation X, spanning the ages of 43 to 58, often goes unnoticed as they find themselves sandwiched between the larger cohorts of baby boomers and millennials. However, what is also being overlooked is the state of their retirement savings, as revealed by a recent survey conducted by asset management firm Schroders.

The survey, which included 2,000 U.S. investors ranging from 27 to 79 years old and was conducted from February 13 to March 3, shed light on the alarming reality that roughly half of Gen Xers surveyed had made no plans for retirement. Furthermore, many revealed that they believed their dreams of a comfortable retirement were simply out of reach.

Of all the generational cohorts, it is Generation X that faces the most significant retirement savings gap, according to Schroders’ findings. While Gen Xers estimated that they would require $1.1 million in savings to retire comfortably, their projected savings amount only totaled $661,000. This results in a savings gap of over $450,000, surpassing the reported gaps for both boomers ($291,500) and millennials ($403,600).

Interestingly, millennials already feel relatively on track with their retirement savings. On average, they anticipate having around $877,000 saved for retirement, though still falling short of their perceived needs. Nevertheless, this is undeniably a substantial sum.

It is clear that Generation X needs to prioritize their retirement planning to bridge this significant savings gap. While they may often be forgotten or overshadowed by other generations, the importance of adequately preparing for retirement cannot be overstated. Reevaluating financial strategies and seeking guidance from financial professionals can help them achieve a secure and comfortable retirement that may seem out of reach but is entirely attainable with careful planning and dedication.

The Retirement Savings Gap for Gen X: A Concerning Trend

Gen X, the first generation to rely on 401(k) plans instead of pensions, is facing a worrisome retirement savings gap, warns Deb Boyden, the head of U.S. Defined Contribution at Schroders. With retirement approaching, it’s crucial for this generation to take the necessary steps to secure their financial future.

Key Mistakes Compound the Problem

Unfortunately, a recent survey indicates that Gen X may be exacerbating the issue by making two significant errors:

Holding too much cash

According to Schroders’ findings, Gen X allocates about one-third of their retirement funds to cash, which is excessive given the savings gap they face. The survey reveals that 63% of respondents admit to holding a large amount of cash out of fear of losing money, while 24% remain uncertain about alternative investment options.

Taking Social Security too early

Surprisingly, only 11% of Gen Xers plan to wait until age 70 to collect Social Security—despite the fact that this would result in larger benefit payments. At age 62, individuals become eligible for smaller payments, but almost half of respondents express concern that Social Security funds may deplete before they have a chance to access them.

Bridging the Knowledge Gap

Addressing these mistakes is crucial for Gen Xers. Deb Boyden emphasizes, “Not only are Gen Xers facing a formidable savings gap, but our findings also suggest a knowledge gap is proving to be a formidable headwind.” It’s imperative for individuals in this generation to take advantage of the time they have left before retirement to develop a solid plan that focuses on long-term financial security.

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