How Prepared is Gen X for Retirement? Not so much.

Published on September 26, 2023

The generation right behind the baby boomers, Generation X, is between 43 and 58 years old (born between 1965 and 1980). Therefore, the oldest Gen Xers are near retirees while the younger cohort still has lots of time to save, invest, and plan for retirement.

However, Northwestern Mutual’s 2023 Planning & Progress* study revealed that a little more than half (55%) of Gen X predict they will not be financially prepared for retirement—more than any other age group. They were also more likely to resist retirement planning than the other age groups; 38% of Generation X members shared that they had not looked for retirement information at all nor spoken to a financial advisor. They rated their financial security an average of 5.6 out of 10.

Gen X needs to save more. A lot more.

The figures Gen X provided to Northwest Mutual about what they need for retirement vs. what they’ve saved also reflect this lack of preparation.

• Respondents in their 40s said they’d need $1.28 million for a comfortable retirement but only saved around $77,000 so far.
• Those in their 50s estimated they’d need $1.56 million but only saved $110,900 to date.
• Also, less than half (45%) expect Social Security to be there for them at all.

According to the study, Generation X respondents plan to work until age 65 (71 for baby boomers). The youngest workers, Gen Z, expressed the most confidence that they will be financially prepared when the time comes to retire. They also plan to retire by age 60. We admire that confidence!

More sobering statistics about Gen X’s retirement readiness

Prudential Financial, Inc.’s research survey, Gen X: Retirement Revised** also points to fears among Gen X that they won’t have enough saved for retirement, and haven’t done retirement planning.

• The results showed that 35% have less than $10,000 saved, and 18% of respondents (up to 12 million individuals) have nothing saved.
• Because of this, 40% of the respondents said they plan to work part-time after they retire.
• Only 12% expect an inheritance to help with retirement income.
• Only 11% said they will rely mostly on a pension while 20% plan to use pensions as a source of retirement income. These low figures are reflective of the fact that the number of traditional pension plans has declined steeply in the U.S. for many years.
• Despite projections that the Social Security trust fund will be depleted in 10 years, 58% of Gen X members said they will rely on it for retirement income.
• Many are not factoring health care into retirement costs.

They are also concerned about how inflation is affecting their savings goals and almost three-quarters of respondents said the current economic environment makes it hard to plan financially beyond their daily needs. Almost one-third (29%) fear being replaced by younger workers.

This lack of a retirement strategy and retirement savings for projected long-term expenses lays out a dicey financial landscape.

Gen X—take control of your future with a self-directed IRA!

There’s time to catch up on retirement savings—and give those savings a boost by opening a self-directed Traditional or Roth IRA. Thanks to a provision in the SECURE Act of 2019, there is no longer an age restriction to open one of these retirement accounts. You can fund your new retirement plan with a relatively small amount to get started . . . or roll funds over from an existing IRA or eligible employer-sponsored retirement plan. As long as you have earned income, you can contribute to your self-directed IRA (before the passage of the SECURE Act, the age limit for contributions was 70 ½).

Plus, self-directed IRAs are ideal for people who know and understand alternative assets such as real estate, precious metals, commodities, tax liens, private equity funding, and many more. If that sounds like you, you can put the power of your investing knowledge into growing your retirement savings through a tax-advantaged self-directed IRA. You do your due diligence about the alternative assets you wish to include, develop a more diverse retirement portfolio, and control your investments as a self-directed investor.

As a full-service self-directed retirement plan administrator, Next Generation Trust Company handles all the account administration and holds the assets. Our team will vet your transactions to ensure they meet IRS guidelines for these accounts, and we provide excellent client education about the many options and benefits of self-direction as a retirement strategy.

Whether you’re 25, 35, 45, or 55, it’s always the right age for individuals with earned income to take control of their future with a self-directed IRA. Need to learn more? Sign up for a complimentary education session or check out our on-demand webinars at your convenience. You can always contact us with questions at NewAccounts@NextGenerationTrust.com or 888.857.8058.

*Northwest Mutual’s annual research study explores U.S. adults’ attitudes and behaviors toward money, financial decision-making, and issues concerning their long-term financial security. The 2023 study gathered data online from 2,740 adults which included 640 Gen Xers. https://news.northwesternmutual.com/planning-and-progress-study-2023

** The Prudential Pulse survey was among 2,000 pre-retiree U.S. Gen Xers. The sample includes 1,717 occupied/working Gen Xers, those currently working full- or part-time, seeking work, or studying. The interviews were conducted online, and quotas were set to reflect a nationally representative population based on age, gender, race/ethnicity, educational attainment, and region. https://news.prudential.com/generation-x-confronts-harsh-new-reality-retirement-unreadiness.htm