Prudential Financial study: Gen Xers stumbling into retirement – Herb Weiss

By Herb Weiss, contributing writer on aging issues

While aging baby boomers ease into retirement, a new research study finds that Generation X, born between 1965 and 1979, are now facing the harsh reality of not being financially prepared for their looming retirement.

This demographic cohort group follows the baby boomers (1946 to 1964) and proceeds the millennials (1980 to 1994).

America’s 65 million Generation Xers are confronted with a new set of financial challenges that are redefining their plans to ease into retirement, just as they enter their final working years, according to Prudential Financial, Inc.’s latest Pulse research survey, “Gen X: Retirement Revised.”

According to the study’s findings, more than one third (35%) of the Gen Xers have less than $10,000 in retirement savings, and 18% have nothing saved. This cohort group has missed out on “Great Wealth Transfer,” from boomers to millennials.  And 46% say that they won’t have enough savings to live comfortably in their twilight years. This generation will be forced to work much longer and will forgo “snowbird lifestyles.”

“Gen X faces one of the most complex landscapes for retirement readiness in decades, including the decline of defined benefit pension plans which supported prior generations’ retirement, as well as significant uncertainty about the economy and long-term Social Security benefits,” said Prudential Vice Chair Rob Falzon, in a statement announcing the survey results released on June 7, 2023. “This data underscores how important it is for Gen X to adopt a new set of retirement strategies designed to protect and grow their savings, and when possible, translate their assets into reliable sources of future income.” he said.

Cracked-Egg Nest

Researchers found that almost 46% (up to 30 million) Generation Xers do not think they’ll have an adequate nest egg to live comfortably in their retirement years. This fear is reinforced by the reality of their accumulated retirement savings. 

The study findings indicate that most Gen Xers are considering delaying their retirement. While 19% of Gen Xers plan to fully retire, 82% say they plan to work part-time or are unsure they will be able to fully retire.  

As to home ownership, Gen Xers “won’t bet the house, say the researchers.” Only 16% of Gen X plan to use their home value to help fund retirement. Most of Gen X are not planning to follow in the footsteps of baby boomers, who are tapping into record home equity and currently make up the highest share of buyers and sellers nationwide,” say the researchers citing National Association of REALTORS report.  

As winters approach, don’t expect Gen Xers to go South, either. Approximately two-thirds (65%) of Gen X plan to stay in one city or town in retirement. Only 15% plan to split time between locations, note the study’s findings.

Gen Xers don’t expect inheritances (the transferring of wealth from one generation to another) to give them a financial cushion they hope for during their retirement. The study found that a measly 12% say an inheritance will be a source of retirement income, even as boomers are expected to pass down over $70 trillion (total wealth figure according to Federal Reserve data). What’s more, 84% of Gen Xers are not planning to leave an inheritance. Only 16% say they are factoring a family inheritance to fund their own retirement.

Gen Xers must face retirement obstacles

The Prudential Financial, Inc.’s latest Pulse research survey also identified additional retirement obstacles that Gen Xers must confront. The findings indicate that this generation is facing complicated problems not seen in the generations that proceeded them. At the same time, the researchers say, Gen Xers are not currently following a retirement strategy, saving enough for their later years, or accounting for long-term expenses and situations.

Gen Xers closely watch the partisan bickering over how to fix an ailing Social Security program. Despite projections that Social Security trust fund reserves could be depleted by 2033 (reported by the Trustees of the Social Security and Medicare Trust Funds report), 58% of Gen Xers say that can’t expect to rely on it as a source of their retirement income. Among those who plan on receiving Social Security, 54% are worried about the program’s funds being depleted.

As to pensions, the study found that only 20% of Gen Xers plan to use pensions as a source of their retirement income, and only 11% will mostly rely on a pension. This reflects the known steep decline in the number of pension plans, which fell by 73% between 1985 and 2020 (Department of Labor data).

While 33% of Gen Xers say they have a retirement strategy, 67% do not. Almost half (48%) are saving, but don’t have a plan as to how to accumulate the savings.

With inflation slowing down, the study found that more than two-thirds (68%) of working Gen Xers are concerned about reaching their savings goals due to inflation, and nearly three-quarters (72%) of all Gen Xers say the current environment makes it hard to plan beyond day-to-day living.

The study found that Gen Xers worry about job insecurity. While an economic downturn still ranks as the biggest threat to this generation’s job security among working Gen Xers (35%), expressed fears of being replaced by younger workers (29%), and less expensive (26%) workers, are close behind.

Finally, the researchers say that Gen Xers are not accurately factoring in critical costs that they may face during retirement. Nearly two-fifths (38%) are not factoring in healthcare costs, and three-quarters (75%) are not accounting for assisted living expenses.

While the average retiree is expected to receive an average monthly Social Security benefit, it was noted that the average monthly cost of retirement expenses in the U.S is $ 4,350 (Bureau of Labor Statistics). The average retirement living gap is $2,520.

“Gen Xers are contemplating significantly different approaches than prior generations to achieve retirement security,” said Dylan Tyson, president, Prudential Retirement Strategies in response to the release of this retirement study. “Together, we must find ways to incorporate the fundamental best practices of traditional pensions into today’s defined contribution–based retirement system. Strategies like protected accumulation and protected income planning are required to help Gen Xers avoid the potential hazards of longevity risk and market volatility on otherwise well-balanced financial plans,” he said.

The Prudential Pulse Survey on Gen X retirement was conducted from March 31 to April 6, 2023. Using a national sample of 2,000 GX adults, ages 43 to 48 and not yet retired. Interviews were  conducted online, and quotas were set to reflect a nationally representative population sample based on age, gender/ethnicity, educational attainment, and region. 

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Herb Weiss, LRI -12, is a Pawtucket-based writer who has covered aging, health care and medical issues for over 43 years.  To purchase his books, Taking Charge: Collected Stories on Aging Boldly and a sequel, compiling weekly published articles, go to herbweiss.com.