Recent surveys have shown that more than one-third of Gen Xers have literally zero retirement savings.
Perhaps even more startlingly is that an even larger swath of this generation is not on track to retire comfortably, let alone maintain their current standard of living in retirement.
29% expect to live primarily off their Social Security benefits.
Bottom line: Is Gen X screwed when it comes to retirement? Or will Gen X have an amazing time in retirement?
Gen X seems to be the ugly step child when it comes to personal finance news. Baby Boomers and Millennials make the headlines while the Gen Xers tend to be overlooked and are more like the middle child shouting, “Marsha Marsha Marsha!”
Loosely defined as those born in the mid 60s to early 80s, Gen X has members in their 30s, 40s and 50s at this point. By your 50s it’s beyond time to really start thinking about retirement. For the youngest of this generation still in their 30s, time is still on your side. But don’t let this advantage slip by.
A new study from Personal Capital highlights the serious issues facing all three generation as they barrel toward retirement. The issues seem to be most dire for Gen X because 34% have no retirement savings at all. The number of Millennials with nothing saved is slightly higher at 39% but they have more time to get caught up and save.
This lack of saving flies in the face of the expectations which show that 56% of Gen Xers expect to need more than a million dollars in order to retire. In case it isn’t obvious, having saved nothing isn’t a good start towards becoming a millionaire. Even with a million dollars saved, you’re only looking at approximately $40,000 to $50,000 of income from that amount of retirement savings.
Part of this obliviousness could be due to a lack of understanding of what it will really take to retire comfortably. Only 24% of Gen X believe that a trusted financial adviser is a key to financial independence in retirement.
Can Gen X Still Save Millions?
It’s never too late to get started or improve your retirement readiness. A 40-year-old can retire a millionaire by saving just $23 per day and investing it well.
Investing pre-tax in your employer sponsored 401(k) can drop the daily cost in half, if not more.
Missing out on employer matching is giving up free money and is the biggest mistake people make in their 401(k) plan. Besides not contributing at all.
Need a Retirement Wake Up Call
Many Gen Xers today are feeling the strains of caring for children while also caring for aging parents. Additionally, some remain shell-shocked from the financial crisis, not to mention the dot.com bust, while others are struggling with sky-high real estate prices.
You may also enjoy this post from Forbes: How Much Should Gen X And Millennials Have Saved At Every Age?
Not to be an alarmist but having zero retirement savings will translate into living off just Social Security. Have you looked at the maximum Social Security check?
Assuming you wait until age 70, and you earned the maximum income your entire working career (35 years or so), you will get just $3,680 per month.
That may sound like a nice number but in order to receive it, your annual salary would have likely been more than $120,000 per year.
Based on that, you can see it only covers about a third of your pre-retirement income.
Important to note that, at this level, some of your Social Security benefits will be taxable, which will further decrease your after-tax income.
The difficulties of retiring solely on Social Security are also highlighted in this survey.
Planning to retire before age 65? You aren’t alone. Fifty-one percent of survey respondents said they plan to retire ahead of this age. The full retirement age for most of these folks is actually 67 which means their monthly Social Security benefits will be lower if they retire before that age.
Keep in mind that the average Social Security check is just $1,404 as of 2018. How fabulous would your retirement be if you had to live off $1,404 per month?
Compared to men, women are traditionally thought of as being better savers.
But according to the study, 40% of women versus 33% of men don’t have anything saved for retirement.
This is likely due to the gender wage gap and because women are more likely to drop out of the workforce to care for children or ailing parents. Because they typically live longer than men, women should make saving for retirement a priority in order to remain independent as they age.
What do you think?
Will Gen X have a harder time achieving financial freedom compared to their older Boomer and younger Millennial counterparts?