Generation X workers feel that retirement reality bites, according to a survey.
A Transamerica Center for Retirement Studies (TCRS) survey finds that 85% of gen Xers in the U.S. believe that their generation will have a much harder time achieving financial security in retirement than their parents’ generation.
“Generation X was slammed by the Great Recession, yet most are now financially recovering,” says Catherine Collinson, president of TCRS. According to the survey findings, 12% were laid off during the recession, 25% had their work hours or wages reduced, and 4% lost their homes.
Most (57%) say they are financially recovering from the recession, but only 12% have fully recovered. A relatively small percentage (14%) said they weren’t affected.
In the aftermath of the recession, just 24% say that saving for retirement is their greatest financial priority. Almost half (48%) are focused on current needs, such as paying off debt (27%) or covering basic living expenses (21%), as their top priorities right now.
Sixty-one percent of gen X workers are confident that they will be able to someday fully retire with a comfortable lifestyle; however, among them, only 14% are “very confident.” Thirty-four percent expect their standard of living to decrease when they retire.
“Next year, the first gen Xers will begin turning 50, and they need a vote of confidence that they can improve their retirement outlook,” she says. “Gen Xers are on a retirement collision course that can be corrected. They still have time to positively change their retirement destiny.”
Most gen X workers are currently saving for retirement, but many are not saving enough, she adds.
Eighty-four percent of gen Xers who are offered a DC plan participate in that plan at an annual contribution rate of 7%.
Among gen X workers currently participating in a DC plan, the survey finds that 27% had taken some form of loan and/or early withdrawal from the plan, including 18% who had taken a loan and 10% an early withdrawal.
“In the coming years before they retire, gen Xers can meaningfully grow their savings,” explains Collinson. “Increasing retirement plan contributions from the current level of 7% of annual pay to 10%, 12% or even 15% can profoundly increase the size of their nest eggs at retirement.”
The survey finds that generation X workers have currently saved an average of $70,000 in total household retirement accounts.
Procrastination is a barrier to retirement planning, she notes. Only 39% of gen X workers prefer not to think about or concern themselves with retirement investing until they get closer to their retirement date.
Half (51%) that provide an estimate of their retirement savings needs indicate that they guessed what that number should be. Twenty-one percent have estimated their savings needs based on current living expenses. Just 12% used a retirement calculator or completed a worksheet.
The majority (61%) of workers have some sort of retirement strategy, but only 14% have a written plan (another 47% have a plan but it is not written down). Most gen Xers with a strategy have factored savings and income needs (56%), ongoing living expenses (56%) and a retirement budget (50%). Fewer than half of them have considered healthcare costs, inflation or taxes.
Sixty-five percent agree that they don’t know as much as they should about retirement investing. The majority (58%) want some level of advice or outside input when saving and investing for retirement. In contrast to their desire for advice, only 35% of gen X workers who are now investing for retirement use a professional financial advisor.
“Gen Xers’ alarm clock is sounding. They cannot afford to hit the snooze button any longer,” says Collinson. “Increasing savings combined with knowledge, expertise and solid planning can help gen Xers achieve a financially secure retirement.”