Gen X, the First 401(k) Generation, Is Least Prepared for Retirement

Members of Generation X (born from 1965 through 1980) feel the least prepared for retirement of four working-age generations, according to a study released Thursday by the Transamerica Center for Retirement Studies and Transamerica Institute.

Part of that unease may be due to many members of that generation being close to, but not yet at, retirement age, according to the report. But researchers said another factor is that Gen Xers are the bridge generation between company-provided pensions and the 401(k) savings industry.

“Generation X entered the workforce in the 1980s and 1990s as traditional pensions were fading from the retirement landscape and 401(k)s were in their infancy,” Catherine Collinson, CEO and president of Transamerica Institute and TCRS, wrote in the report. “In these early days of 401(k)s, relatively few employers offered them, plan features and services were primitive by today’s standards, and there was a widespread lack of awareness about the need to save. Consequentially, Generation X fell behind on their savings before they even knew it was time to get started.”

According to the research, which surveyed 5,725 employees, the median age when Gen X workers began saving for retirement was 30, as compared with Millennials (25), Gen Z (19). Baby Boomers, who were working in the age of pensions and very early 401(k) plans, started at a median age of 35.

Now only 17% of Gen Xers feel very confident they will be able to retire with a comfortable lifestyle, according to the study conducted in late 2022. In comparison, 27% of Millennials feel very confident in their retirement future, as do 23% of Gen Zers and 21% of Baby Boomers.

So Gen Xers clearly are not alone in their retirement anxiety. Transamerica researchers attributed some of the strain on retirement saving and outcomes to the pandemic and recent economic uncertainty. Furthermore, the researchers pointed out, other generations face their own unique problems.

Baby Boomers (born from 1946 through 1964) were already mid-career when defined contribution plans were introduced, and despite a mix of pensions and their own savings, nearly half (49%) expect to or already are working past age 70. That has made them “especially vulnerable to employment setbacks, volatility in the financial markets, and increasing inflation,” Collinson wrote.

Millennials (born from 1981 through 1996), who range from their late 20s to early 40s, are seen as living in their “sandwich years,” as they juggle raising children and caring for aging parents, which can “greatly influence their ability to save and invest for retirement.”

Meanwhile, members of Generation Z (born from 1997 through 2012) are entering the workforce after enduring a global pandemic and a “tumultuous” labor market. Unlike those in other generations, however, they have a “long time horizon to build and grow their retirement savings,” Collinson wrote.

Gen X, therefore, appears most vulnerable, as members are in their prime earning years but seriously looking at retirement, and many feel they have not saved enough in retirement accounts. That generation has a median total household retirement savings of $82,000, compared with median savings of $289,000 for Baby Boomers, $49,000 for Millennials and $29,000 for Gen Z, according to the research.

“Every generation in the workforce is at risk of not achieving a financially secure retirement. Generation X is especially vulnerable,” according to Collinson. “They can still improve their prospects by setting realistic expectations, engaging in financial planning, and re-envisioning their life course including time in the workforce and retirement.” 

They also called on “policymakers, the private sector, and employers” to strengthen the retirement system for all generations.

“The SECURE 2.0 Act of 2022 has a multitude of provisions that address many issues, but a highly coordinated effort is needed to ensure they are implemented and successful,” according to Collinson. “Moreover, it is time to strengthen Social Security and Medicare and expand these benefits to include long-term care services, affordable housing, and improved financial literacy.”

The nonprofit Transamerica Institute is the parent organization of the Transamerica Center for Retirement Studies. The Transamerica Institute is funded by the Transamerica Life Insurance Company and its affiliates.