Concerns for Gen Xers: Retirement Readiness Lags Behind Needs

Gen X Faces Retirement Challenges

As the oldest members of Generation X near the age of 60, a concerning trend is emerging regarding their financial preparedness for retirement. A recent study indicated that only a mere 14% of Americans aged 44 to 59 feel they have adequately saved for retirement. This demographic, now entering a vital stage of their lives, expresses a considerable gap between what they expect to need for a secure retirement and what they have managed to save.

Retirement Savings Gap

On average, Generation Xers anticipate needing about $1,069,746 to retire comfortably, yet they project that they will only have approximately $602,944 saved upon leaving the workforce. This creates a significant savings deficiency of $466,802, which is even larger than the expected shortfalls for both Millennials and Baby Boomers. Millennials, aged 28 to 43, estimate they will need around $1,171,067 in savings, with expectations of having $848,939 saved. Meanwhile, non-retired Baby Boomers estimate their requirements at $1,004,742 but expect to have only $651,673.

Concerns About Financial Security

According to Deb Boyden, the Head of US Defined Contribution at Schroders, these disparities can lead to a dire situation where Generation X could become the lost-retirement generation if they do not prioritize their financial planning. She emphasizes that many members of this generation were raised in an era where 401(k) plans replaced traditional pensions, and they missed essential automated savings features like auto-enrollment and auto-escalation that could have aided in their preparation.

Fears of Outliving Savings

Many Gen Xers are expressing deep concerns about whether they will outlive their savings during retirement. The survey revealed that over half (54%) of Gen X respondents are very concerned about this issue, which is noticeably higher than the 50% of Millennials and 40% of Baby Boomers who share the same worries. This apprehension highlights the need for more effective financial planning within this age group.

Low Engagement with Financial Advisors

Interestingly, many in Generation X are insufficiently engaging with financial professionals. The survey shows that only 27% of Gen Xers currently work with a financial advisor, in contrast to 37% of Baby Boomers and 31% of Millennials. Alarmingly, 48% of Gen X respondents admitted to not having engaged in any retirement planning, a rate higher than the 41% for both Millennials and Baby Boomers.

Confidence in Achieving Dream Retirement

Due to a lack of planning and guidance, a significant 60% of non-retired Gen Xers feel uncertain about their ability to achieve their ideal retirement, which is more than their Millennial and Baby Boomer counterparts. Boyden stresses that seeking the assistance of a skilled financial advisor or exploring tailored investment solutions is essential for them. A well-structured plan that includes a strategy for generating retirement income, along with timely decisions regarding when to claim Social Security, could offer much-needed assurance.

Key Findings from the Study

Further insights reveal that despite knowing the importance of saving for retirement, Gen Xers are holding a large portion of their retirement assets — around 35% — in cash. A staggering 64% cite fear of market losses as their primary reason for keeping their savings in cash instead of investing them in potentially higher-yielding options.

Concerns About Returning to Work

A considerable number of retired Gen Xers also share worries about potentially needing to re-enter the job market to meet their financial obligations. Over half (53%) expressed concern about this, notably higher than the 20% of Baby Boomers who feel the same way.

Pension and Social Security Apprehension

Additionally, one in four non-retired Gen Xers expresses dread regarding the prospect of a retirement devoid of regular paychecks. Interestingly, only 10% plan to wait until the age of 70 to claim their Social Security benefits, which is when they would receive the maximum monthly benefit. Of note, 43% of Gen Xers intend to claim benefits before turning 70, driven by fears that Social Security funds might run out.

About Schroders and Their Mission

Schroders, a prominent global investment manager with over 200 years of experience, plays a pivotal role in helping clients navigate the complexities of financial planning and investment strategies. Their commitment to active asset management aligns their deep knowledge of market dynamics with tailored investment solutions, aiming to ensure that individuals and institutions can achieve their financial goals effectively.

Frequently Asked Questions

What is the primary concern for Generation X regarding retirement?

The main concern is that many members of Generation X fear they will outlive their retirement savings.

How does Gen X's savings gap compare to other generations?

Generation X's savings shortfall is larger than those projected by Baby Boomers and Millennials, indicating a more significant challenge ahead.

What percentage of Gen Xers are working with financial advisors?

Only 27% of Gen Xers are currently working with financial advisors, which is the lowest when compared to Millennials and Baby Boomers.

Why are Gen Xers holding substantial cash in retirement accounts?

About 35% of their retirement assets are in cash due to fears of losing money in the stock market.

What financial strategies should Gen Xers consider to ensure a secure retirement?

They should consider seeking financial advice and creating a tailored plan that includes informed decisions about retirement withdrawals and Social Security benefits.

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