Generation X Faces Real Retirement Hurdles

Baby Boomers and Millennials are the two age groups most frequently considered by retirement industry research, but an increasing number of experts have stressed that Generation X, also called the “sandwich” generation, should be analyzed on its own.

The generation, often described as those born between 1965 to roughly 1980, established their careers during a period of serious global reform, both politically and economically. Investors in Generation X faced down both the Internet market crash of the early 2000s and the credit crisis of 2008 relatively early in their careers—leading many to hold off on saving.

“Gen Xers have really kind of been on their own to do it themselves,” says Catherine Collinson, president of Transamerica Center for Retirement Studies (TCRS). “They were, in many ways, at the bleeding edge of the use of 401(k)s and of personal retirement savings responsibility.”

While the financial crisis occurred almost 10 years ago, challenges still linger in the future for Gen Xers. According to the 2016 report by TCRS, “Perspectives on Retirement: Baby Boomers, Generation X, and Millennials,” 41% of Gen Xers say they have only “somewhat recovered” from the recession, while 14% have not yet recovered and 8% believe recovery will never happen.

“It definitely is a generation that was squeezed the most over the past 15 years,” agrees George Walper, president of Spectrem Group.

With such challenges looming, it’s no wonder why Gen X workers express less interest in plan participation compared with both the older and younger generations. A study released by Spectrem Group found that Gen Xers hold the least amount of concern with active saving/investment participation than any other generation. Additionally, a study conducted by the Insured Retirement Institute (IRI) reported that about eight in 10 Gen Xers believe they are either somewhat or not very knowledgeable in investing, and two-thirds rate their financial IQ as average or low.

NEXT: Helping Gen X is possible 

Collinson notes Gen Xers should be looking at saving more than 10% to 15% of annual salary. That may be tough, as the median annual contribution rate for Gen Xers has been much lower than that over the past several years.

“The median annual salary contribution is only 7%, which tells us that many are likely not saving enough,” she says. “Of the three generations, they’re also the least likely to be saving more than 10%.”

In order to combat these challenges and lack of knowledge, Collinson encourages plan sponsors and advisers to emphasize meeting the needs of Gen Xers in specific life phases, starting by organizing educational campaigns.

“One of the most important things they can do is simply decide to make a concerted effort to focus on Gen X,” says Collinson. “Knowing that they’re between ages 39 and 52, building out communication and education campaigns catered to the life phase that they’re already in right now.” 

And a little encouragement and education may be all that some Gen Xers really need to accomplish success in saving. According to the TCRS report, when asked how much they believe they should be saving for retirement, 52% of Gen Xers guessed their response, while only 12% utilized a retirement calculator or completed a worksheet.

For Gen Xers taking early withdrawals from 401(k) savings—whether it be for a serious medical expense, credit card debt or another major payment—Collinson suggests sponsors and advisers establish education sessions dedicated to the importance of emergency savings and alternative ways to address short-term financial needs.

NEXT: More on Gen X 

According to the TCRS report, Gen Xers were found most likely to have taken out an early withdrawal, at 30%. Twenty-three percent reported taking out a loan from a 401(k), IRA or similar plan, and 15% took an early and/or hardship withdrawal. 

“For some steps forward they have taken, many have also taken steps backward with their retirement savings,” she says. “Gen Xers are turning to the retirement account, which can help that short-term need but also can negatively affect their long-term savings retirement.” 

Another way sponsors and advisers can boost engagement is through reminding Gen Xers of special tools that may be available as part of the plan, such as retirement calculators. While retirement calculators are efficient, Walper believes they highlight certain key points while downplaying others, rather than establishing a holistic financial outlook.

“They’re not really a financial plan, they’re kind of a point in time in calculation,” he says. “Gen Xers require more holistic guidance.”

He encourages advisers to work with Gen X participants on painting a general financial plan tailored to their own personal needs.

“Advisers need to help these people understand how to manage their debt, and make decisions about where they should allocate their discretionary savings,” he concludes.