The oldest members of Generation X turn 59 1/2 this month, the earliest age at which workers can begin withdrawing retirement assets without penalty. But many Gen Xers are far from ready for their golden years, with nearly half saying it would take a “miracle” for them to be able to retire, according to a new Natixis study.
Generation X, people born between 1965 and 1980, is the first generation of American workers to come of age with 401(k) plans as their primary retirement vehicle after employers moved away in large measure of traditional pensions in the 1980s. But the 401(k) puts the onus on participants to figure out how much to save, how to invest and how to withdraw their money in retirement — a do-it-yourself approach described by retirement expert Teresa Ghilarducci . how weak.
This has left Gen Xers largely on their own to plan for retirement, and many are woefully underprepared, not only in terms of the amount of assets they've disposed of, but also in their understanding of key financial information, according to Natixis, an investment bank. Median retirement savings for Gen X households is about $150,000, far from the roughly 1.5 million dollars that Americans say they need to retire comfortably.
What Gen X has in common with Jan Brady
Gen X “is the Jan Brady of generations,” being overlooked while baby boomers and millennials get more attention, noted Dave Goodsell, executive director of the Natixis Center for Investor Insight. “They were the kids who were left alone after school, and they're also alone when they retire.”
About 1 in 5 Gen Xers worry they can't afford to retire from work even if they could save $1 million for retirement, the study found. And about a quarter are worried about the lack of savings forcing them to go back to work after retirement.
Other recent studies have also found that Gen Xers are in a tough spot for retirement, with the National Institute for Retirement Security finding At the start of this year, the typical Gen X household with a private retirement plan has $40,000 in savings. About 40 percent of the group hasn't saved a penny for retirement, according to the study.
Still, that doesn't stop Gen Xers from dreaming of retirement, with survey participants telling Natixis that they plan to retire at 60 on average. They also believe their retirement will last about 20 years, shorter than many retirees actually experience.
These expectations may seem discordant, especially given the lack of retirement savings they will need to fund their older years. But Goodsell chalked up the conflicting views on retirement, with half of Gen Xers thinking they need a miracle to retire even if they want to stop working at 60, to “wishful thinking”.
“The other thing I see is that 48% of people in the survey stopped thinking about [retirement]” Goodsell noted. “I interpret that as saying they're stressed. But having your head in the sand isn't a great strategy for anything.”
Many are too optimistic
Gen Xers also have some unrealistic views of their potential investment returns, with the group saying they expect their retirement assets to have long-term returns of 13.1% above inflation, results from Natixis With the current inflation rate of approx 3.3%, that would imply an investment return of 16.4%, well above the S&P 500's typical annual return of about 10%.
Meanwhile, only about 2 percent of Gen Xers understood key aspects of bond investing, such as the impact that higher interest rates have on bond prices, the analysis found.
“For a lot of people, when they're thinking about investing, it's a back-of-the-napkin thought,” Goodsell said. Her advice to Gen Xers is to “learn as much as you can and be realistic about what you can achieve.”
Still, Goodsell noted, there are some aspects of retirement that are out of workers' hands, which can add to people's anxiety. About 4 in 10 Gen Xers worry they won't be able to work as much as they want, and that, on the other hand, is based in reality, Goodsell noted.
A 2018 study by the Urban Institute that tracked workers from age 50 to at least 65 found that most had to stop working before reaching retirement age, with 28 % who stopped working after a layoff, while another 9% retired due to poverty. Health. Only 19% said they voluntarily retired.
