Gen X Needs Aggressive Action to Be Retirement Ready

Generation X workers face some formidable obstacles to achieving retirement readiness, according to Transamerica, but there is hope for the generation if aggressive action is taken.

A new survey report from the Transamerica Center for Retirement Studies (TCRS) finds nearly nine in 10 (85%) Gen X workers—defined by Transamerica as those born between 1965 and 1978—believe they will have a much harder time achieving financial security in retirement than their parents. Catherine Collinson, president of TCRS, explains that Gen X workers are worried that Social Security and other government-provided benefits will not be available by the time they reach retirement age, and many carry insufficient defined contribution (DC) plan account balances to successfully self-fund even a modest retirement.

“Generation X was slammed by the Great Recession, yet most are now financially recovering,” Collinson explains. According to the survey findings, 12% of Generation X workers were laid off during the most recent recession. Another 25% percent had their work hours or wages reduced, and 4% even lost their homes.

The good news is that a majority of Generation X workers (57%) say they are financially recovering from the recession, but only 12% say they have fully recovered. A relatively small percentage (14%) said they were not directly affected by the Great Recession. The bad news moving forward: just 24% of Gen Xers say saving for retirement is their greatest financial priority. Nearly half (48%) point to current needs, such as paying off debt (27%) or covering basic living expenses (21%), as their top financial priority right now.

Even with the low prioritization of retirement savings, 61% of Gen X workers are confident 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,” Collinson explains. “Gen Xers are on a retirement collision course that can be corrected. They still have time to positively change their retirement destiny. They can do it.”

Transamerica’s research suggests most Generation X workers are currently saving for retirement, but many are not saving enough to generate adequate lifetime income. “Finding the extra income to save may be extremely difficult,” Collinson notes. “However, it is a worthy challenge that can make or break a comfortable retirement.”

In another encouraging sign, 84% of Gen Xers who are offered a 401(k) or similar defined contribution (DC) plan participate in that plan at an annual median contribution rate of about 7%, according to Transamerica. This is still below the industry’s general saving targets ranging between 10% and 15% of yearly income, Collinson explains, but there is still time for most Gen Xers to ramp up their savings rates and get closer to a fully funded retirement.

The survey found Generation X workers have currently saved just $70,000 (estimated median) in total household retirement accounts.

Collinson says it is critical for Gen Xers, and especially those with low DC account balances, to do whatever possible to avoid early withdrawals. “Taking out loans and early withdrawals can severely inhibit the long-term growth of retirement accounts,” she adds. “Unfortunately, many Gen Xers have found themselves in situations where it was necessary to do so.”

Among Gen X workers currently participating in a 401(k) or similar plan, the survey found 27% have taken some form of loan and/or early withdrawal from their plan, including 18% who have taken a loan and at least a 10% early withdrawal.

“Procrastination is the enemy,” Collinson says. “Our survey found that 39% of Generation X workers prefer not to think about or concern themselves with retirement investing until they get closer to their retirement date.”

Transamerica suggests Gen Xers could benefit from better utilization of retirement planning tools and advice. For instance, roughly half (51%) of Generation X workers who provided an estimate of their retirement savings needs indicated 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 of Generation X workers (61%) have some sort of retirement strategy, Transamerica says, but only 14% have a formal written plan. Another 47% have a plan that is not written down. Most Gen Xers with a strategy have investigated savings and income needs (56%), on-going living expenses (56%), and a potential retirement budget (50%). Fewer than half of Gen Xers say they have considered the specifics of health care costs, inflation, or taxes.

Sixty-five percent of Generation X workers agree they do not 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 stated desire for advice, however, only 35% of Generation X workers who are now investing for retirement use a professional financial adviser. 

All of this combines for a fairly bleak retirement picture for Generation X, Transamerica says. A majority of Gen X workers (54%) plan to work past age 65 or do not plan to retire at all. Many Gen Xers say they will continue working as they start to wind down their careers, at least on a part-time basis. Doing so requires they have access to employment opportunities, Transamerica notes, and this may be problematic as only 44% of Gen Xers say they are focused on keeping their job skills up-to-date.

“Working longer and delaying retirement is an effective way to help bridge retirement savings shortfalls,” Collin says. “In order to stay employed, Gen Xers need to be hyper-vigilant about keeping their job skills up-to-date and in step with employers’ needs.”

More about the survey report findings is available on the TCRS page at