Sombre Retirement Forecast for Generation X Workers Revealed in New Report
A new report published by the National Institute on Retirement Security (NIRS) has warned that Generation X workers, now aged between 41 and 56, are facing a bleak retirement outlook. The report scrutinized the retirement readiness of Gen X and revealed alarming findings.
According to the report, the typical Gen X household has only $40,000 in retirement savings, with the majority of these savings concentrated among top earners. Furthermore, the study found that Black and Hispanic Gen Xers had considerably lower savings and less access to employer-provided retirement plans compared to their white counterparts.
Tyler Bond, a co-author of the report and NIRS research director, described Generation X as the leading edge of the new retirement in America. With most Gen Xers entering the workforce after the shift away from defined benefit pensions, they are unlikely to enjoy the secure retirement income that previous generations had.
The report, based on research data from the Survey of Income and Program Participation, defined Gen X as those born between 1965 and 1980, comprising about 64 million Americans, or nearly 20% of the US population.
The dire retirement situation for Gen X has been highlighted in various reports this year, including the 23rd Annual Transamerica Retirement survey, which revealed that around one in three Gen Xers have no financial strategy for retirement.
Catherine Collinson, CEO of Transamerica Institute and Transamerica Center for Retirement, expressed concerns over Gen X falling through the cracks due to the significant shift in the retirement landscape.
The NIRS research found that the median account balance for an individual in Gen X is only $10,000, with one in four Gen Xers having no retirement savings account at all. Black Gen Xers had a median retirement account balance of just $1, with half having no savings. Additionally, two-thirds of Hispanic Gen Xers have not started a retirement savings account.
Gender also plays a role in the retirement savings gap, with median retirement savings of $13,000 for single Gen X men and $6,000 for Gen X women. Married men and women tend to have higher savings levels.
One major factor contributing to the retirement savings crisis for Gen X is the lack of access to employer-sponsored retirement plans. Only 14% of Gen Xers have a traditional employer pension plan, and around half have access to an employer-provided retirement plan like a 401(k).
Angela M. Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University, emphasized that workers typically don’t start their own retirement accounts when they lack access to an employer-sponsored plan. Only 5% of workers take the initiative to open a retirement savings account if not provided by their employer. However, if an employer-sponsored plan is available, participation increases to 72%.
Part-time work also exacerbates the retirement savings gap, with 12% of working Gen Xers being part-time employees. It is easier to save with an employer-provided retirement account, as workers with an IRA or Keogh account had an average balance of $148,920, compared to those with a 401(k), 403(b), or other employer-sponsored plan, who had an average balance of $173,553.
The top quartile of Gen X workers earning $76,789 and above have an average savings of around $250,000, while the bottom half, earning $43,921 or less, have little or no savings.
Despite the daunting outlook, there may be hope for Gen Xers. With many currently in their peak earning years and the youngest having two decades to work with, starting to save now can help make up for lost time.
New policy initiatives, such as the provision in the Secure 2.0 legislation, set to go into effect in 2025, may also provide some relief for part-time workers. The provision requires 401(k) or 403(b) plans to allow long-term part-time employees who have worked at least 500 hours per year for two consecutive years to participate.
Additionally, several states have passed laws to address the retirement savings dilemma. Fifteen states have implemented auto-IRA programs, requiring private employers without their own savings plans to enroll workers in a state-facilitated individual retirement account.
However, the report concludes that there are still significant challenges to overcome. Many Gen X workers lack confidence in the future of Social Security, with concerns that either it will go bankrupt before they can claim benefits or that benefits will be reduced in the future.
Tyler Bond stresses the need for urgent actions to strengthen the nation’s retirement structure, not only for Gen X workers but also for future generations. The retirement challenges facing Gen X are looming, and solutions must be implemented to ensure a more secure future for these workers and those following them.
Kerry Hannon is a Senior Reporter and Columnist at Yahoo Finance, specializing in workplace futurism and retirement strategies. She is the author of several books on the subject and can be followed on Twitter @kerryhannon.
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