Good Luck Gen X

For a generation named for its inability to be quantified it may come as a surprise that Generation X may go down in history for having the worst numbers, at least when it comes to retirement. Generation X, those now in their 40s and 50s, account for about one-fifth of the population, a significantly smaller cohort than other generations. As to retirement, their numbers lag behind and not just by population.
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According to CNN, ^[1] GenX is wildly unprepared to maintain their standard of living into retirement. Known for their love of DIY, GenX unfortunately “came of age around the same time as the now-standard DIY retirement planning trend. (Or you might call it the "Boomers pulling up the ladder behind them" trend.)” CNN reports that the median amount that GenX households have in retirement savings is $40,000. Making matters so much worse is that Social Security may only be able to pay 80% of the promised benefits by 2023, right when they will begin to retire.
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We’ve been tracking the retirement problems for GenX for a while and mentioned that this generation’s troubles may help explain the recent changes to annuities. In our article Annuities and GenX – Why New Annuity Rules May Help the Hopeless Generation,^[2] we said “Of the age groups needing help with retirement GenX may be the leader. One study referred to GenX as generally “hopeless” about retirement – many don’t believe they’ll be able to retire at age 65, and even more have anywhere near enough saved.
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In fact, one study noted: “nearly 40% of Gen Xers have no retirement savings strategy.” That same study noted that GenXers face a host of reasons for being behind on retirement, including “Gen X matured during the phaseout of pensions for 401(k) plans, caught amid the rollout…. Another article put it more bluntly – GenXers have an emotionally negative response to the investment market: “almost half of this generation reportedly lost their wealth between 2007 and 2010 … more than any other generation… And GenXers carry six times more debt than their parents did at the same age.  New research indicates that 67%, two thirds of the generation, do not have a retirement strategy.
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Studies show that familiarity with annuities closely parallels astrophysics, with new research by USAA that 4 in 10 Americans don’t even know what an annuity is. But that’s not true for GenX. Studies show that roughly 55% of GenX wants to learn more about annuities, significantly higher than Boomers (about 30%).^[3]And that may be a good sign, at least for GenX.
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GenX’s concern about the economy tracks their significant retirement concerns. Studies show that GenX took more steps to cut back on discretionary spending during the post-pandemic inflationary period, and was more concerned about inflation than other generations, “43% of Millennials believe that inflation has already peaked. Only 5% of Gen Xers felt the same way.”^[4]
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Additional studies on the concerns of GenX aren’t showing anything surprising: these studies add texture to the story of the Hopeless Generation but don’t show movement away from a very bleak outlook for their retirement. The good news is that changes to retirement regulations, like the SECURE Acts may provide targeted assistance to those worries, through changes to annuities and through making catch-up contributions easier.

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^[1] https://www.cnn.com/2023/09/27/success/gen-x-retirement-savings-boomers

^[2] https://www.bcgbenefits.com/blog/annuities

^[3] https://www.thinkadvisor.com/2021/07/01/gen-x-investors-want-to-hear-about-annuities-survey

^[4] https://www.annuity.org/2022/09/06/generation-x-concerned-for-state-of-economy-survey

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‍These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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