Most Gen Xers expect to need more income in retirement than previous generations, but they’re not confident their savings will suffice, according to a new study from the Insured Retirement Institute.
Among Gen Xers, 52% say they’ll need more than $55,000 a year in retirement. About one-third (32%) of Gen Xers say they’ll need more than $75,000, while only 24% of Baby Boomers say the same.
Yet, despite expecting to need more, Gen Xers have less money saved for retirement than previous generations. The average Gen X nest egg is $404,068. By comparison, still-working Boomers have an average of $652,780 saved, while current retirees—a mix of Boomers and members of the Silent Generation—have an average nest egg of $624,940.
Additionally, fewer Gen Xers expect to receive income from a private or public pension in retirement than previous generations, and nearly one-third don’t expect to receive anything from Social Security.
The gap between expected income needs and money saved means only 32% of Gen Xers believe their retirement savings will last them until the age of 85. And only 15% of Gen Xers say they’re very confident they’ll be able to live comfortably in retirement.
Yet most Gen Xers—58%—also expressed confidence that they’d be able to cover their basic expenses in retirement, including medical costs, as well as have funds for travel and leisure.
“Gen Xers have a fundamental disconnect that is consistently observed in IRI and other consumer research focused on retirement income and expenses, namely that the desire to maintain lifestyle leads to hopeful responses,” said Frank O’Connor, vice president for research at IRI, in a statement. “Some may believe they can work longer or part time, expect to receive an inheritance, or plan to sell a home for a significant profit. Whatever the case, retirement lifestyle expectations are out of step with retirement savings levels and confidence measures.”
Educating Gen Xers about their retirement options is key to bridging the gap, O’Connor said. The study found that 60% of Gen Xers say they are very interested in retirement income that’s guaranteed for life, but only 17% say they plan to buy an annuity for retirement income. Gen Xers also indicated a preference for options that helped them manage risk or create secure lifetime income in their defined contribution plans.
“Gen Xers’ desire for guaranteed income should be expected given their lack of confidence in Social Security and the endurance of their savings in retirement,” O’Connor said. “The time is now to hone education and marketing efforts toward Gen Xers and apply lessons learned to the next generation approaching their peak earning years, which also happens to be the largest generation in history: Millennials.”
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