Gen X has the largest wealth gap of any generation, and it means ‘the American Dream of retirement is going to be a nightmare’ for them

Retirement bites. The oldest members of Generation X are swiftly approaching the traditional retirement age, but few are financially prepared for the next chapter, a new report finds.

Sandwiched between the larger baby boomer and millennial generations, Gen X typically doesn’t get as much attention as its older and younger cohorts despite making up around 20% of the population. But America needs to start paying attention: Born between 1965 and 1980, the Gen Xers on the cusp of their seventh decade are, theoretically, just a few years away from leaving the workforce.

And according to new research, many are not prepared for a comfortable retirement. They have the largest wealth gap of any generation, according to the Schroders 2023 U.S. Retirement Survey. On average, these workers say it will take a bit over $1.1 million in savings to retire comfortably, but expect to have around $660,000 saved. Over 60% of non-retired Gen Xers are not confident in their ability to achieve a dream retirement, compared to 49% of millennials and 53% of baby boomers.

Of course, that’s only perception. But Schroders is far from the only report that finds Gen X isn’t financially prepared for retirement. A recent study from the National Institute on Retirement Security (NIRS), a nonprofit research organization, found the typical Gen X household has $40,000 in retirement savings, while the average has $153,300, according to Fidelity Investments, far less than the $1.1 million they think they’ll need. (Averages are often skewed by a few wealthier account holders.)

As the difference between the typical amount and the average indicates, retirement savings is highly concentrated among top Gen X earners, according to NIRS’s report: The top 25% has $250,000, on average, while the bottom quartile has around $35,000. The median is more striking, with the bottom quartile having just $200—“almost nothing.”

In fact, Gen X is the only generation in which a majority believe they won’t be financially prepared for retirement, according to Northwestern Mutual’s 2023 Planning & Progress Study. They also report “markedly lower” feelings of financial security than other generations.

The stakes are high for Gen X

Underfunding retirement isn’t unique to Gen X. Every generation has challenges when it comes to saving for the future, and over half of workers feel behind on building up their retirement accounts, according to a recent Bankrate study. But Gen X is most likely to feel this way, according to the survey.

And Gen X is also notable because “they are the first generation to rely on 401(k) plans instead of pensions and the next in line to retire,” says Deb Boyden, head of U.S. defined contribution at Schroders. Only about 14% of Gen Xers have a pension; broadly speaking, Gen X is on the hook for saving for a lot more of their retirement on their own than boomers. While millennials get a lot of the attention for this shift in the retirement landscape, Gen X will be the pioneers of managing the changes. “The stakes are higher for Generation X and the margin for error is lower,” Boyden says.

They also faced the rise of student loan debt, as well as higher health care costs than the generations before them. They are projected to live longer than boomers, meaning they will likely need even more saved.

That said, not all is lost for the “forgotten generation.” Some 71% own their homes, according to Redfin, and many still have decades until retirement, giving them plenty of time to put a plan together and still reap the benefits of compound interest. It’s normal for many people to start saving for retirement in their forties and sometimes even fifties.

But that would require a big shift in behavior: According to the NIRS, only around half of Gen Xers are actually participating in a workplace retirement plan, a statistic that may be difficult to improve with the rising cost of living and other financial headwinds (many Gen Xers are also likely to be caring for both children and older relatives).

“Most Gen Xers don’t have a pension plan, they’ve lived through multiple economic crises, wages aren’t keeping up with inflation, and costs are rising,” Dan Doonan, executive director of the NIRS, said in a statement. “The American dream of retirement is going to be a nightmare for too many Gen Xers.”