Retirement in America is undergoing a generational change that needs to be acknowledged. As baby boomers age out of the workforce, many continue to be sustained by traditional defined benefit (DB) pension plans. The next cohort, Generation X, will face new and difficult challenges–and many are not ready. I know, because I am also a Gen Xer.
Who are Generation X?
Also known as “the latchkey generation” for our independent childhoods being raised by sets of working parents, Generation X was born between 1965 and 1980. We will be the first to reach retirement under the new paradigm: the widespread move from DB plans to defined contribution (DC) or 401(k) plans in the U.S. This is a barely cited yet fundamental societal change that shifted the responsibility to save for retirement from employers to individual employees.
How we deal with what lies ahead for Gen X will set the precedent for decades and generations to come.
The shift promises to be difficult. According to the recently released Schroders 2023 U.S. Retirement Survey, 61% of non-retired Gen Xers are not confident in their ability to achieve a dream retirement. This compares to 49% of millennials and 53% of non-retired baby boomers. And based on my conversations, a dream retirement for Gen Xers does not mean lavish holidays and private yachts. It means the lowest level of minimum financial certainty to meet our changing needs as we age.
Gen X retirement age
Unsurprisingly, this generation is preparing to make do with less financial support from U.S. Social Security: just 11% reported they will wait until age 70 to receive maximum Social Security benefit payments–and 47% reported concern that Social Security may run out of money, more than both baby boomers (38%) and millennials (44%).
We found that 84% of Gen X respondents reported being concerned or terrified of not receiving regular paychecks. Many will need to keep working in retirement and hope they will be healthy enough to do so. Our retirements could be a lot less comfortable than they were for our parents and grandparents.
How much does Gen X have saved for retirement?
For too many of us, the numbers do not add up: Gen Xers reported that on average they will need roughly $1.1 million in savings to retire comfortably, yet they expect to stop working with only about $660,000 saved–a savings gap of around $450,000.
It’s important to keep in mind that these are mean figures. According to a report from the National Institute on Retirement Security, the average account balance in 2020 for private retirement accounts among working Gen Xers was $129,994. This is woefully short of the amount of savings most of us will need to be secure in retirement.
The median account balance was far scarier: $10,000–and 40% had zero savings.
Unless this profoundly changes, many of us will not be able to maintain our standards of living in retirement. Notably, our survey found that 45% of Gen Xers have not done any retirement planning. There are also stark differences in the level of preparedness: Retirement savings for the top quartiles are substantial, suggesting the top earners will have little trouble transitioning to a comfortable retirement, but those in the two lowest quartiles reported having so little money saved that there is little meaningful planning they feel they can do.
As the first American generation to head into retirement without the safety net of a corporate pension plan, the stakes are higher and the margin for error is lower for Gen X.
Fortunately, even the oldest members of Gen X have several potentially good years left before full retirement age. Therefore, to my fellow Gen Xers: We must use this remaining time to develop realistic retirement plans. We must save as much as possible before it’s too late. It is crucial to improving our futures. All eyes are on us now, for we are the example of what faces the generations to come.
Tiffani Potesta is the Head of Distribution at Voya Investment Management. A version of this story originally published on Fortune.com on Feb. 16, 2024.
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