Missing money: 35% of Gen X has less than $10k in retirement savings
Updated: Sep 16
Karolina Grabowska for Pexels
Compared to previous generations, the 65 million members of Gen X are facing an especially daunting task of building their retirement savings, and many are woefully underprepared. To make up for lost time, employers can help them maximize the savings opportunities they still have, and budget properly once they leave the workforce.
Only one-third of employees ages 43-58 have a retirement strategy in place, and 35% have less than $10,000 set aside for their retirement, according to a recent survey by Prudential. Not surprisingly, 82% of Gen Xers said they are not confident they will be able to fully retire, or already anticipate working part-time once they leave their jobs.
Changes to retirement plans, paired with a more volatile economy, have put Gen X employees in a very different circumstance than their baby boomer peers, says Dylan Tyson, president of retirement strategies at Prudential.
"They haven't had access to the same pension plans; they needed to rely on defined contribution plans as the primary employer-base savings tool, and that's a big difference," Tyson says. "Contribution plans have basically taken all the best practices of old traditional pensions and built them slowly into the design, but they need a shift of mindset to say, 'What does this give me in terms of monthly retirement income?'"
Nearly half of respondents are fearful they will not have enough saved to live a comfortable retired life and are beginning to reimagine what that means for their future. In addition to delaying retirement, only 16% plan to use any equity from their home to add to their retirement savings, according to a National Association of REALTORS report, and just 12% of respondents said an inheritance will contribute to their post-work income. In turn, 84% said they will not be leaving an inheritance behind.
With other factors working against anticipated income, such as projected Social Security depletion, inflation and economic instability, all employees, especially those closer to retirement age, can benefit from employer-provided financial planning, Tyson says. The most important thing for employers to do with their Gen X workforce is to help them understand what kind of income they will need in retirement, anticipate key factors such as longer-than-average lifespan, day-to-day expenses, assisted living and healthcare costs, and come up with a plan to meet it.
"Look at it with Social Security as a base, and think about how to fill any gap to the extent there's a difference between the needs they want to be sure are covered for their entire life, and the amount of income they would have on top of it," he says. "Think about government, employer and individual savings — those three legs of that stool — and say, 'Do all the sources of income come together as a stream of income for the rest of my life, and is that consistent with what I imagined?'"
Employer-provided financial technology programs are one low-cost, effective way to help Gen X play catch-up with their retirement savings accounts, and plan sponsors can offer insight on how to meet the various needs of a workforce and drive engagement, Tyson says.
Prudential's Stages for Retirement, a goal-based tool that projects retirement income and spending, can help employees reevaluate their projections and track progress. Employers can also offer information about 401(k) catch-up contributions through the Secure 2.0 Act and highlight their matching benefit, as well as encourage auto-enrollment in company retirement and savings benefit plans. Above all, making methods for progress clear and actionable will empower people and allow them to be optimistic, says Tyson.
"We need to take the complexity out and make it as dead-simple as possible," he says. "It's not just this abstract thing where you're talking about compound annual growth rate of return; instead it's expenses and priorities, and it helps people understand what that means in terms of income need and what choices they have. Those seem to be the most impactful things because they help you relate to your future self so that he or she is not a stranger."