Gen X's Looming Retirement Crisis: Can They Catch Up To Millennials?

Generation X faces looming retirement challenges with inadequate savings, while millennials lead the way in financial planning. Learn how Gen X can bridge the gap in this eye-opening article.

Oshi Saxena
Sep 30, 2023 19:35 IST
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Gen X Faces Retirement Crisis

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As the sun sets on Generation X's career horizon, they are faced with a daunting challenge – retirement. Following in the footsteps of the Baby Boomers, a generation that weathered economic ups and downs, technological revolutions, and societal shifts, Gen X now faces the stark reality of inadequate savings.


A recent report by the National Institute on Retirement Security (NIRS) paints a sombre picture, which serves as a cautionary tale for the generations that follow.

The DIY Retirement System: A Flawed Model

A recent report from the National Institute on Retirement Security paints a grim picture. It suggests that many Gen Xers are simply not building enough savings to maintain their standard of living when they retire. This revelation strikes like a thunderbolt, and the implications are dire.

"The data pretty clearly indicates that the system we have in place now will not provide adequate income for many workers," says Tyler Bond, NIRS research director and co-author of 'The Forgotten Generation: Generation X Approaches Retirement.'

What system is Bond referring to? It's the do-it-yourself model of saving for retirement that came of age when Gen Xers did. They were the first generation to enter the labour market after the shift from employer-run defined benefit pension plans to 401(k)-style defined contribution accounts.

The Stark Reality


While some of the oldest Gen X adults are fortunate enough to have at least some pension income to supplement their savings and Social Security benefits in retirement, most will not. The NIRS report reveals that only a meagre 14% of working Gen X adults are in a defined benefit pension plan. As for savings in workplace retirement plans and IRAs, it's disheartening to learn that "the bottom half of [Gen X] earners have only a few thousand dollars saved," according to the report.

The median amount that Gen X households have in retirement savings is a paltry $40,000. This figure is alarming, especially when we consider that retirement savings are the cornerstone of financial security during one's golden years.

A Harsh Reality: Income Disparities

Income emerges as the primary determinant of who emerges from this retirement saga unscathed and who finds themselves stranded in financial turmoil. The report painfully underscores that retirement savings for Generation X tend to be concentrated among the highest earners. However, even these high earners, with an average Gen X retirement savings balance of nearly $130,000 for individuals and $243,000 for households, may be treading on thin ice. If their savings serve as the main source of income in retirement, they might just find themselves skating towards financial oblivion.

The Ominous Future

As Gen Xers approach retirement age, they must confront the harsh reality that most won't have a pension to rely on. Social Security benefits, while vital, may also be in jeopardy. Current projections suggest that by 2034, Social Security will only be able to pay 80% of promised benefits. This is the grim backdrop against which Gen Xers must prepare for their twilight years.


Racial Disparities

Beyond income disparities, stark racial and ethnic divides further amplify the gloom of Gen X retirement savings. Among employed Gen Xers, Black and Hispanic workers stand at the bottom of the savings ladder. The average retirement account balance for Black workers is a meagre $53,456, while for Hispanic workers, it is even lower at $42,335. The medians paint an even bleaker picture – $1 for Black workers and a disheartening zero for Hispanic workers.

Whereas, white workers average $165,917 in their retirement accounts, while Asian workers boast an average of $189,764. Even their medians, standing at $26,900 and $30,000, respectively, dwarf those of their Black and Hispanic counterparts. Despite these disparities, the report underlines a bitter truth: most Gen Xers, regardless of race, are failing to meet retirement savings targets.

Bleak Benchmarks and Uncertain Futures

Setting benchmarks for retirement savings becomes challenging due to the diversity of individual circumstances. Factors such as retirement age, marital status, location, potential income sources, and more all play a role in determining the requisite nest egg. However, a broad recommendation suggests that by age 45, Gen Xers should have saved two to four times their household income. By age 50, this figure should rise to three to six times, and by age 55, four-and-a-half to eight times.

The Millennial Advantage


As Gen X grapples with these challenges, Millennials are proving to be game-changers when it comes to financial security. The younger generation has learned valuable lessons from their predecessors and has made significant strides in securing their financial future.

Millennials have harnessed technology to enhance their financial literacy. Apps and online resources make managing finances and investments more accessible. Unlike Gen X, many Millennials have started investing early, benefiting from compounding interest and long-term growth.  Not impressed with the idea of living in a box, millennials are adept at exploring multiple income streams, from freelancing to the gig economy, bolstering their savings.

What can be Done? 

With financial education, prudent planning, and adopting some of the strategies embraced by Millennials, Gen X can still strive for a comfortable retirement. Firstly, it's crucial to assess your current financial standing, including likely sources of income and assets in retirement.  Determining what changes you can make is the next critical step. Saving more, considering a later retirement age, or seeking guidance from certified financial planners are all viable options. Lastly, staying informed about new programs and benefits is essential. 

The road to retirement for Gen Xers is bristling with obstacles, from the dwindling safety net of Social Security to stark racial and ethnic disparities in savings. The key to navigating this rocky terrain lies in proactive financial planning and a commitment to securing your future by taking cues from Millenials. It's a reminder that the future doesn't have to be bleak, and with the right approach, retirement dreams can still come true.

Suggested reading: Gen Z's Work Struggles: Battling Unhappiness Beyond Paychecks

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