Long known as the sandwich generation for their caregiving needs to both aging parents and children, Gen Xers are feeling a tighter squeeze when it comes to their retirement.
Prudential’s latest survey, “Gen X: Retirement Revised,” found close to 30 million (or 46%) of Gen Xers do not believe they will have the proper savings to live comfortably throughout their retirement. Their beliefs may stem from reality: 35% of those surveyed have less than $10,000 saved, and 18%—or nearly 12 million Gen Xers—have saved nothing so far.
Additionally, 47% said they plan on retiring later than expected, and 9% expressed they would never retire. This compares to 8% who believe they will leave the workforce earlier than anticipated, and 36% who say they will retire at their projected age.
When it came to retirement strategies, Prudential found 67% of Gen Xers said they had no form of retirement tactic, 48% noted saving but lacked a proper approach, and 19% said they are neither saving nor do they have a retirement strategy. Plus, for a group that is nearing retirement in the upcoming years, 48% disclosed not spending any time per week thinking about their retirement, Prudential reported.
Pensions and Social Security shrink while inflation and volatility rise
This absence of savings is likely attributed to a former, dated retirement strategy—one that saw American workers betting on Social Security and traditional pensions to account for the bulk of their golden year funds. Just 20% of Gen Xers plan to use pensions as a source of retirement income, with 11% claiming they will mostly rely on it.
Reports of rising inflation has also increased financial worries among the group as well, as 68% of Gen Xers indicate concerns on reaching their savings goals due to inflation, and 72% say the current environment has made it difficult to plan beyond daily costs.
With pensions diminishing significantly over the last decades, reports of upcoming Social Security depletion, and past and current financial crises and market volatility, retirement for Gen Xers is a multifaceted issue.
“Gen X faces one of the most complex landscapes for retirement readiness in decades, including the decline of defined benefit pension plans which supported prior generations’ retirement, as well as significant uncertainty about the economy and long-term Social Security benefits,” said Prudential Vice Chair Rob Falzon, in a statement.
Prudential findings show that even with dismal reports of lasting Social Security, Gen Xers continue to see it as possible income, with 58% revealing they will rely on it as a source of retirement funds. This is even as over half (54%) of Gen Xers say they are concerned of their Social Security income exhausting during retirement, as the average monthly benefit is just $1,830, Prudential reported.
Retirement resiliency
But it’s not all doom-and-gloom, the report finds. Gen Xers still have time to remedy savings for a healthy retirement, said Dylan Tyson, president of Prudential Retirement Strategies, in an interview with 401(k) Specialist. “This means that Gen X will need to plan differently for their retirements than people have for the last century, but it’s not too late to right the ship,” Tyson added. “Gen X is resilient, and there are earning years left that can have positive impacts on protected lifetime income.”
According to the report, 56% are currently saving more than 10% of their current income, 40% plan to increase contributions to a retirement account, and 39% said they will allocate additional cash from a tax refund or bonus into a retirement fund. Sixteen percent of Gen Xers plan to use their home value to help fund retirement.
Others are shifting their lifestyles to support savings. Eighty-six percent of Gen Xers say they will shift financial and lifestyle habits to bolster their personal finances and retirement savings, while 44% are aiming to find additional sources of income to hasten savings.
Retirement tools for flexibility and readiness
Risk mitigation and lifetime income strategies are also critical in helping Gen Xers avoid the potential threats that market volatility, longevity risk, and sequence of returns risk can have on an otherwise well-balanced financial plan, said Tyson.
For example, products with a protected lifetime income benefit offer the potential for upside investment growth, as well as a measure of downside risk protection against unpredictable factors like market volatility and longevity risk, Tyson further explained. Pairing these strategies along with a retirement plan can further protect individuals and near-retirees.
As workers age, individuals and their financial advisors need to prepare for shifting lifestyles, whether that means delayed retirements, part-time work, staying longer in lifelong homes, and even living longer than expected. “Defined contribution plans, interest-bearing personal savings products like money market funds, investment vehicles, and protection strategies can all play key roles in generating sustainable lifetime income to meet desired outcomes,” Tyson concluded.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.