Generation X falling short on retirement preparedness

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Fully half of Generation X says that saving for retirement is their top financial concern, but a new study from the Insured Retirement Institute finds that the amount they have already saved for retirement and their preparations for the future fall way short of where they need to be.

The good news is that most Gen Xers still have time to set money aside for retirement, says Frank O’Connor, vice president of research and outreach for IRI.

“When we looked at what they saved vs. what a current retiree spends and then vs. what an average Social Security payment would be, you see these gaps in readiness,” he says. “You only have 8% of Gen Xers who have saved enough to where they could purchase enough future income to make up what an average retiree needs.”

That 8% has saved $250,000 or more for retirement. That is the amount a 53-year-old would need to buy a deferred income annuity now that would produce $30,000 of annual retirement income, which is what the average person needs to “fill the gap between current average annual retiree expenditures and the average Social Security benefit,” according to the report.

"Most Gen Xers have yet to save enough, nor have they tried to determine what they need to save for retirement."

Most Gen Xers have yet to save enough, nor have they tried to determine what they need to save for retirement, says O’Connor.

“Only 40% actually tried to figure out what to save for retirement; one-third didn’t think of healthcare costs in those calculations,” he says. “They are missing the full equation. For most of them, they are not even thinking about it in terms of an equation or calculation to set a target for their savings, to achieve enough savings at retirement, to generate income to have a standard of living they want to have in retirement.”

The report found that 64% of Gen Xers have money saved for retirement. Of those, 77% have added to their retirement accounts in the past 12 months. Seventy-three percent of Gen Xers with retirement savings have less than $150,000 saved up, compared to 77% in 2013 and 76% in 2011.

It is almost too late for the baby boomers to be having these discussions, but Generation X and the millennials still have time to make decisions about what is important to them, says O’Connor. They can cut expenses now and set a savings target that will help them achieve a good and sustainable retirement.

Advice is key to helping this generation save enough for retirement.

“To the extent that employers can provide information about how accumulated retirement savings can be turned into income, auto enrollment, auto escalation, these sorts of things can increase the savings of a Gen Xer, even a Gen Xer who is unwilling or unable to sit down and devote time to thinking about contributing more,” O’Connor said.

More than half of Generation X takes time to monitor their retirement accounts through periodic online checkups. Printed statements are used by about a third and about a quarter go online to check their accounts when prompted by an email or text, in reaction to market news or when they are with their financial professional, the IRI found. Only 5% say they don’t monitor their accounts.


Rebalancing of retirement accounts is also important in reaching a retirement savings goal, but according to the report only four in 10 Gen Xers rebalance their accounts annually and about half only rebalance every few years or rarely.

When asked what they would do if they ran out of money in retirement, 65% said they would return to the workforce and a similar number, six in 10, said they would cut back and rely solely on Social Security.

“There are certainly difficulties with those assumptions, with that being any serious part of a plan, because it assumes so many things. It assumes you will be able to return to the workforce and it assumes the workforce will want you,” O’Connor says.

It also assumes that a person can cut back enough to live on the amount provided by Social Security.

Healthcare costs are also a factor. “If your health deteriorates [and] you can’t return to the workforce, healthcare costs will make it challenging to live solely on Social Security,” he says

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Retirement readiness Retirement benefits Retirement planning Retirement education IRI