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Common Retirement Planning Challenges for Gen X
Members of Generation X, often called the "latchkey generation," may feel retirement looming on the horizon. If you’re feeling concerned, you’re not alone. Born between 1965 and 1980, Generation X has grown up with significant economic and social changes. One big shift has been the decline of traditional pensions and the rise of 401(k) plans, which places more responsibility on employees to save for retirement.
This evolution, combined with economic upheavals like the dot-com bust in the early 2000s and the Great Recession in 2008, may have left many Gen Xers wondering if they’ll have enough money to retire. Let’s examine some factors that make it especially challenging for Gen X to save for retirement, as well as strategies to help combat uncertainty.
Unique financial hurdles facing Generation X
There’s no question Gen Xers are faced with significant obstacles when it comes to saving. Some underlying factors include:
- A large retirement savings gap: Unfortunately, most Gen Xers are simply not saving enough money to retire. According to recent estimates, the median retirement savings among Gen X in the first quarter of 2024 was $54,500—falling far short of the 1.54 million needed for a comfortable retirement. A lack of clearly defined retirement savings goals could be to blame. Additionally, mounting credit card debt and rising interest rates have made saving more difficult.
- Sandwich Generation pressures: Many Gen Xers in the sandwich generation financially support children and aging parents, significantly impacting their ability to put money away for retirement. Furthermore, Generation X was also the first to carry substantial college loans, with an average student loan debt of $45,796, and many are now sending children off to college. Balancing these responsibilities can be emotionally draining and financially taxing.
- Economic uncertainty and job security: If you’re like many Gen Xers, economic instability throughout your career has made job security a top concern. Dealing with aging parents and sick children often contributes to job loss fears as well. Coupled with this generation’s tendency to resist job searching for a potentially higher-paying opportunity, many are afraid of working longer than planned, or facing a lower standard of living in retirement.
Recent trends favor digital solutions
As the first generation to grow up in the digital era, Gen X may not be surprised by the rising interest in digital currencies as a potential—but risky—source of retirement income. A recent study found that 28% of Gen Xers have incorporated cryptocurrency into their retirement strategy. Yet despite its appeal, only one in four Gen X investors trust digital currency as an investment vehicle, caution that could stem from living through previous financial crises.
Additionally, many in Generation X rely heavily on digital resources such as robo-platforms for financial advice. A recent survey indicated that only 40% of Gen Xers are relying on a financial advisor to help with retirement planning, the lowest percentage among all generations. However, this may turn around as over half acknowledge the value of professional advice, particularly when it comes to financial and retirement income planning.
Actionable strategies for a comfortable retirement
Although Generation X may grapple with retirement savings more than most, taking certain actions now can help you make strides:
- Increase savings: It’s a crucial time to boost retirement contributions, including taking advantage of options such as catch-up contributions if you’re over 50. It’s also an excellent time to take another look at your investment portfolio to identify opportunities to maximize returns or reduce risk.
- Seek professional advice: A trusted advisor can help you create a personalized, actionable retirement plan geared to your needs and concerns. They can also recommend strategies to help you increase savings and manage risk more effectively.
- Create a backup plan: Reducing debt and building an emergency fund are crucial to improving financial security. These measures can help alleviate stress about “what ifs” by providing a safety net for unexpected expenses, like a job layoff or sudden repair bill.
- Explore flexible retirement options: A gradual approach to retirement, such as taking on a side gig or transitioning from a full-time to a part-time job, can ease your transition to full-time retirement while providing a steady income stream.
Redefining retirement for future generations
Gen X is blazing the trail as the first generation to retire without the safety net of traditional pension plans. Despite this and other significant obstacles, a financially secure retirement is possible. Start preparing now by doubling down on savings and paying off debt. You may also want to consider partnering with a financial professional who can create a planning strategy addressing your unique needs, or developing a flexible approach to retirement that aligns with your goals and lifestyle.
