While their parents belonged to the "Greatest Generation," Gen X may soon be carving out a reputation as the "Broke Generation."
A recent survey conducted by Clever Real Estate polled 1,000 Gen Xers born between 1965 and 1980 to find out how they fare when it comes to personal finances and the road to retirement. A staggering 56% of Gen Xers said they have less than $100,000 saved for retirement, and 22% said they have yet to save a single cent.
The reasons for the lagging savings varied, with many citing poor economic conditions and backbreaking student debt as retirement roadblocks. With the eldest members well into their 50s, the reality is that Gen Xers are facing a retirement crisis, and unless they take action now, they won't be able to retire comfortably.
Early Financial Setbacks Have Gen X Behind
One of the main reasons why Gen Xers have yet to save enough for retirement is that they have faced several financial challenges throughout their lives. A majority entered the workforce during the recession of the early 1990s, which made it difficult to secure stable jobs and earn decent wages.
They also faced significant student loan debt, with the average amount owed being a whopping $43,438 per borrower. Generation X holds 38.8% of the $1.63 trillion in federal student loan debt, accounting for more than any other generation.
Gen Xers have also been hit hard by the housing crisis, with many of them purchasing homes at the market's peak in the mid-2000s. When the market crashed, many of these homeowners found themselves with properties worth less than what they had paid for them, leaving them with negative equity. As a result, they could not sell their homes or refinance their mortgages, making it difficult for them to save for retirement.
Additionally, many Gen Xers have not taken advantage of retirement savings plans like 401(k)s and IRAs, which could have helped them save more for retirement. According to the Clever survey, 64% of Gen Xers are saving 10% or less of their monthly income for retirement. Experts recommend that workers save a minimum of 10-15% of their pre-tax income each year for retirement, including any employer match.
Historic Inflation Adds Mounting Pressure
Of all the significant events in their lifetime, Gen Xers say the current inflation crisis has had the most impact on their financial situation, surpassing the COVID-19 pandemic and the 2008 recession. More than two-thirds of Gen Xers (69%) report that inflation has negatively impacted their retirement plans and 40% say they have no confidence that they can afford retirement at all.
A Large Majority of Gen X Is in Debt
No matter what your yearly income may be, it's tough to devote any money to retirement savings when you carry a significant amount of debt. When discussing what prevents them from helping their future selves, 80% of the Gen Xers surveyed said that they were carrying some form of debt, with 52% indicating they have at least $10K in non-mortgage, typically credit card debt.
This credit card debt may be because Gen Xers are pinched between two generations, costing them an arm and a leg. They have to care for their parents from the aging Baby Boomer generation while still shelling out money to help their adult children from the Millennial generation. Tack on personal expenses, and it's easy to see why these middle-aged Americans are far from the career finish line.
While the desire to retire may be there, the money just isn't. A whopping 64% of respondents said they stopped saving for retirement not because they don't want to but because they simply can't afford to.
It's Never Too Late to Start Saving
As Gen Xers retire, the lack of savings becomes even more critical. Without adequate savings, they will be unable to maintain their standard of living or pay for essential expenses like healthcare and housing. This means more and more individuals will need to rely on government programs like Social Security and Medicare.
Ironically, it seems that Millennials (aka children of Gen Xers) are transforming the way retirement savings are approached, with many having already saved more than their parents did at the same age.
To play catch up, Gen Xers need to take action to increase their retirement savings. Here are a few steps they can take:
1. Start saving as much as possible: Even if you've yet to save much for retirement, it's never too late to start. Try and save as much as possible, even if it means making some sacrifices in your current lifestyle.
2. Maximize retirement savings: If your employer provides a 401(k) or a similar plan, enroll and contribute as much as possible, taking advantage of any employer matching programs. Additionally, consider opening an IRA to boost your savings.
3. Prioritize debt repayment: Focus on paying off high-interest debt like credit cards and personal loans. By doing so, you'll have more funds available for retirement savings.
4. Cut unnecessary expenses: Trim non-essential purchases such as dining out or buying expensive clothing. Seek ways to save on monthly bills, such as reducing energy usage or negotiating lower service rates.
5. Explore stock and mutual fund investments: Stocks and mutual funds can offer higher returns than traditional savings accounts or CDs, but they also carry more risk. Research thoroughly and consult a financial advisor before making investment decisions.