Generation X has been the first generation to rely primarily on their own individual savings through 401(k)-like plans, moving away from traditional defined-benefit pensions. However, nearly half of Gen Xers report that their retirement savings are behind schedule, with many struggling to catch up due to factors such as credit card debt, existing loans, and financially supporting family members. The oldest Gen Xers will turn 60 next year, but half of them haven’t calculated how much they need to save for retirement or when they can afford to retire.
Employers could help Gen Xers catch up by providing professional financial planning and advice services, an emergency savings account feature, and a guaranteed income option for their retirement plan holdings. The lessons learned from this generation’s saving challenges have led to improved options for younger workers, such as auto-enrollment, target-date funds, and auto-portability. Millennials, born between 1981 and 1996, are most likely to report their retirement savings are on track or ahead of schedule, while baby boomers who are still working are worried about having enough to retire comfortably and are retiring later than prior retirees.
While Gen Xers are struggling to catch up on their retirement savings, Generation Z is already planning for an earlier retirement than previous generations. Despite their youth, many Gen Zers have started saving for retirement, with a median savings of around $29,000. However, the second half of Gen Xers’ careers is fast approaching, and they will face challenges such as retirement income, longevity risk, and healthcare spending in retirement.
The shift from traditional pension plans to 401(k) plans has been a significant change for Gen X, who are the first generation to rely primarily on their own savings for retirement. With the decline of pensions in the private sector and the rise of 401(k) plans, Gen Xers have struggled to save enough for retirement due to factors like credit card debt, loans, and supporting family members. Employers can help by providing financial planning services and improved retirement plan options.
The financial industry has noted the challenges faced by Gen Xers in saving for retirement, with many reporting that they will need significantly more savings than they currently have to retire comfortably. Baby boomers who are still working are also feeling the pressure of saving enough for retirement and are planning to work part time in their retirement years. The optimism of Gen Zers, born between 1997 and 2012, who are already planning for an earlier retirement presents a stark contrast to the struggles faced by Gen Xers.
In conclusion, the shift towards individual retirement savings through 401(k) plans has posed challenges for Gen Xers, who are struggling to catch up on their retirement savings. Employers can play a role in helping Gen Xers by providing financial planning services and improved retirement plan options. While other generations, such as millennials and Gen Zers, are more optimistic about their retirement savings, Gen Xers must address challenges such as retirement income, longevity risk, and healthcare spending in retirement as they approach the second half of their careers.
